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BUDGET 97: REPORTS
Ministry of Finance and Corporate Relations
Province of British Columbia
B. Topic Boxes:
The 1997/98 budget has been built with an explicit element of caution introduced into the revenue estimate. The method for introducing this explicit element of caution into the 1997/98 revenue forecast was to use economic assumptions that are lower than both: (a) what the government thinks is likely to occur; and (b) the average forecast from the Minister's economic conference (Report A has further details).
Specifically, the revenue forecast is based on the assumption that the province's economy will grow 1.6 per cent in 1997, rather than the 2.2 per cent the government expects and the 2.4 per cent that was the average of forecasts from the Minister's conference (see chart).
The reason for introducing this caution is to provide greater certainty that total revenues will be on or above budget. This will help ensure that government's fiscal targets will be met. If the revenue forecast had been based on the budget economic forecast, the 1997/98 revenue estimate would increase by $100-150 million.
In 1995, the government commenced the Enhanced Performance and Accountability Initiative to concentrate management attention on achieving program goals while continuing to live within budgets. This initiative has benefited from cooperation among legislators, the Auditor General, deputy ministers, and government as a whole to improve government performance for the benefit of all British Columbians.
In support of the initiative, Treasury Board has:
Treasury Board has approved a pilot project to include performance information in the 1997/98 Estimates. Legislators and the public at large will be given a clear description of some of the major objectives of government programs, and can see what services are being provided with taxpayers' money.
The four programs included in the Estimates are:
Each program, in addition to the standard Estimates presentation, provides the following information extracted from its 1997/98 business plan:
Crop Insurance performance measures include the value of crops insured, payments made to farmers, loss ratio of claims to premiums and the percentage of administrative costs to premiums (see page 70 of the 1997/98 Estimates).
Office of the Chief Investment Officer performance measures compare the return on managed investments against a wide range of industry benchmarks (see pages 156 and 157 of the 1997/98 Estimates).
Vital Statistics performance measures show transaction volumes, unit costs of transactions, service turnaround times and customer satisfaction (see pages 178 and 179 of the 1997/98 Estimates).
Royal BC Museum performance measures cover the number of visits and clients served, revenue earned as a percentage of expenditure, and customer satisfaction, as well as educational indicators such as the number of BC students attending museum programs (see pages 214 and 215 of the 1997/98 Estimates).
It is expected that the actual performance achieved by these programs will be reported in future annual reports together with an explanation of any significant difference between actual performance and the targets. This will provide legislators, government managers, the media and the public with the information on the performance of these programs and the value received for money spent.
This pilot project will be used to assess how useful the information is, and how it will affect public debate and government management practices. This will determine whether and how the pilot is expanded in future years.
In the first phase of this initiative, government is focusing on better planning and monitoring information to help improve program performance and resource allocation. Ministries are being encouraged to use business plans for internal planning and program design. Treasury Board's funding decisions in future will reflect an increasing use of performance information in the budget allocation process.
As part of their business plans, 15-20 per cent of government programs are already using performance measures. This is targeted to rise to 50 per cent by 1998. All ministries have outlined plans and a timetable for developing performance measures for all of their programs over the next three years.
Performance measures are also being included in Crown corporation business plans, and Crown corporations will regularly report their performance results to government. Government is also reviewing how to extend accountability for performance to funded agencies such as school districts, post-secondary institutions, and regional health boards and councils.
Commencing with the 1995 budget, the government presented a financial statement that combines the estimated annual surplus or deficit of government ministries and special offices with Crown entities.
This statement provides an estimate of government's overall surplus or deficit for the upcoming year. The Summary Financial Statement of Revenue and Expenditure, like the Consolidated Revenue Fund Statement of Revenue and Expenditure, is prepared on a basis consistent with the government's accounting policies.
As noted in the last two years, a key accounting policy issue is the treatment of capital assets. The Canadian Institute of Chartered Accountants (CICA) has been reviewing this issue.
The provincial Auditor General has recommended that the government capitalize all of its capital assets. However, as the CICA has not yet completed its review of the treatment of capital assets, the government has decided to adopt what it believes is an appropriate capitalization policy. As noted in the 1996 budget, commencing with the 1995/96 Public Accounts, the government announced it would capitalize land, buildings and other fixed assets held by all Crown entities, other than highways infrastructure expenditures of the BC Transportation Financing Authority.
The government has now decided to extend this policy to certain capital assets held by the Consolidated Revenue Fund (CRF). The impact of this policy change on the Summary Financial Statement of Revenue and Expenditure is to increase the surplus by $11 million in the 1996/97 budget estimate amount; and to decrease the deficit by $7 million in the 1996/97 revised forecast amount and $27 million in the 1997/98 budget estimate amount.
As noted last year, the adoption of the policy to capitalize assets has no impact on the government's total taxpayer-supported debt. Under the financial management plan, all borrowing is reported, regardless of whether that borrowing is applied to operations, capital or investments.
The following table provides the estimated surplus on the summary statement basis for the 1996/97 and 1997/98 fiscal years, in accordance with the government's accounting policies as laid out in the 1995/96 Budget Report, adjusted to reflect the accounting policy change with respect to the CRF noted above.
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