Timely Financial Reporting: A Path Forward for the Public Accounts of Canada

Why this matters

The timely publication of the Public Accounts is crucial for transparency and accountability in government finances. As noted by the Government in the 1996 Annual Financial Report, Canadians need more timely and clear information about government finances and that only “with such information can Canada’s citizens play an active and effective role in guiding government decision-making.”[^1] Even so, Canada does not adhere to the International Monetary Fund’s (IMF) standard for advanced fiscal reporting, which recommends that governments publish their annual financial statements within six months of the end of the fiscal year.[^2]

Over the past decade, parliamentarians have repeatedly asked for more timely release of financial information. While the Government has offered explanations regarding timelines under the current approach, no meaningful improvements have been made. This report explores the challenges to the timely publication of the Public Accounts of Canada and offers a path forward to parliamentarians for improving the process.

Introduction

Status quo

The Public Accounts provide a comprehensive overview of all financial transactions conducted by government departments and agencies throughout the fiscal year and inform on the Government’s year-end financial position.[^3] The Public Accounts is comprised of audited consolidated financial statements along with additional financial information and analysis. The Financial Administration Act (FAA) requires that Public Accounts of Canada must be tabled on or before December 31st. In the last fifteen years, the Government has typically tabled them no earlier than mid-October.

The timely publication of the Public Accounts is crucial for transparency and accountability in government finances. By publishing the Public Accounts earlier, the Government would provide parliamentarians with more time for ex-post financial scrutiny and better information for assessing the Government’s budget plans and estimates.

The Government falls short of the standard for advanced practice for financial reporting as set out by the IMF fiscal reporting guidelines.[^4] The guidelines for advanced practice recommend that governments publish their year-end consolidated financial statements within six months of the close of the fiscal year (September 30th in Canada’s case), to align with current state-of-the-art policies and practices. Historically, Canada publishes the Public Accounts between seven and nine months after the close of the fiscal year. In comparison, more than half of the 38 member Organisation for Economic Co-operation and Development (OECD) countries publish annual financial statements within six months of the close of the year, though only 10 of those countries publish audit reports within the same time frame.[^5]

The federal Public Accounts are published later than most provincial and territorial public accounts. More than half of the provinces and territories consistently release audited consolidated financial statements within the six-month time frame of the close of the fiscal year (Table 1). All but three have mandatory publishing dates earlier than the federal government, suggesting that more timely publication of federal financial statements is feasible.

Leading the provinces, Alberta and Saskatchewan published their audited consolidated financial statements for 2022-23 by June 30th, within three months of the fiscal year's end. A common aspect among the provinces that publish their Public Accounts before the federal government is that they can do so even when their legislative assemblies are not in session.

Previous proposed solutions

Parliamentarians’ concerns about the timing of access to the Government’s financial statements have been long standing. An early measure to improve the timeliness of financial statements was the introduction of the Annual Financial Report (AFR).

First published for the 1993-94 fiscal year, the AFR presents a condensed form of the audited consolidated financial statements included in the Public Accounts.[^6] From 1994-95 to 2017-18, on average, the Annual Financial Report was published 20 days in advance of the Public Accounts.[^7] In 2018, to be in compliance with the Canadian Auditing Standards, the Office of the Auditor General (OAG) recommended that the AFR and Public Accounts be published at the same time.[^8]

More recent recommendations regarding the timing of the Public Accounts have come from the Parliamentary Budget Officer (PBO) and the House of Commons Standing Committee on Public Accounts (PACP). In January 2022, the PBO recommended that Parliament consider legislative amendments to the Financial Administration Act that would move the required release date of the Public Accounts by three months, from December 31st to September 30th, to respect IMF recommendations for advanced practice.[^9]

In June 2023, PACP recommended “that the Government amend the Financial Administration Act to change the deadline for tabling the Public Accounts from December 31st to October 15th, to align with the tabling date of some Canadian provinces and peers in the Organization for Economic Co-operation and Development (OECD)”.[^10]

Current production process

The production process for the Public Accounts spans from October through September annually, with instructions to departments and agencies for the preparation of financial information typically made available in February.[^11] Starting in May, the Receiver General (RG) begins to receive the final financial summaries from government departments and agencies for the previous fiscal year.[^12] The Canada Revenue Agency (CRA) is typically one of the last to submit its financial summary in mid-July.

From May through September, drafts of the Public Accounts volumes are prepared by the RG and reviewed by Treasury Board Secretariat (TBS) and Finance Canada, with multiple revisions based on feedback.[^13] Simultaneously, the OAG audits the consolidated financial statements included in the first volume. Once the Public Accounts volumes are finalized, a signatories meeting is held with officials from TBS, Finance and the RG to sign the audited consolidated financial statements. Promptly after, the OAG releases their signed audit opinion. Typically, this takes place in early September.

Ultimately, the Government has the discretion as to when to table the Public Accounts, so long as they do so before December 31st. On average, the Public Accounts have been tabled 223 days after the end of the fiscal year and two months after the signing of the financial documents, with notably longer delays during election years and the pandemic (Figure 1).

Treasury Board of Canada Secretariat, Public Accounts of Canada.

Treasury Board of Canada Secretariat, Public Accounts of Canada.

Challenges to timely publications

The delays in the timely publication of the Public Accounts can be attributed to three main factors: the current preparation timeline for the financial information included, the time elapsed between signing the financial statements and the tabling of the Public Accounts, and the Government's inability to table them when Parliament is not in session. To improve the timeliness of the Public Accounts, a combination of these factors needs to be addressed.

Time lapsed between signing and tabling dates

Once the financial statements are signed, the RG has indicated that 30 business days are required to prepare all materials for tabling. During this time, all four formats of the Public Accounts in both official languages (printed, PDF, HTML, and Open Data) are finalized. PDF copies of the Public Accounts are submitted to an externally contracted printing company that returns a “print ready” copy.[^14] Finance, TBS, the OAG and the RG must verify that the printed copy has been accurately reproduced. Approval to print is then given to the printing company, which prints and delivers the Public Accounts to the House of Commons for tabling.

While the RG has indicated that 30 business days are needed for this process, the actual time between signing and tabling the Public Accounts has varied widely over the past decade, ranging from 22 to 74 business days (Table 2). Given that the Public Accounts were tabled in under 25 business days three times in the last ten years, this suggests that the 30-business day requirement is not a binding constraint and can be improved upon.

Therefore, the Government could reduce the time between the signing of the financial statements and the tabling date, while the preparation process before signing remains unaffected.[^15] Assuming the average signing date remains in early September, to meet the PACP recommendation of tabling by October 15th, the Public Accounts would need to be tabled roughly within 25 business days. To meet the PBO’s recommendation of tabling by September 30th, the Public Accounts would need to be tabled roughly within 15 business days.

Tabling only while Parliament is sitting

Some of the variance in tabling dates can be explained by election years. According to the FAA, the Public Accounts must be tabled in Parliament while it is sitting. This restriction limits timely release and is particularly evident in election years when Parliament often does not reconvene until much later in the fall. Consequently, over the past five election years, the Public Accounts have typically been tabled in December, an average of 245 days after the close of the fiscal year, even though the Auditor General consistently concluded its audit over three months earlier (Table 3).

Advancing the audit opinion

If the timeframe between the signing of financial statements and the tabling of the Public Accounts cannot be reduced, then the audit opinion would need to be advanced to ensure a timely release date. This would require a joint effort from both the Government and the OAG.

In a PACP committee testimony, the Auditor General testified that the OAG was willing to work with the government to provide an earlier audit opinion.[^16] In front of the same committee, the Comptroller General at the time stated that an October 15th tabling date could be met, unless under exceptional circumstances. To advance the audit opinion and ensure the Public Accounts can be tabled by September 30th (10 business days earlier than October 15th), a more comprehensive review of existing procedures and timelines may be required.

In particular, shortening the timeline for the compilation of the tax revenue information would be the most challenging aspect of advancing the preparation of the Public Accounts. Currently, tax revenue information is one of the last and most complex components to be integrated into the Public Accounts. CRA typically provides the Personal Income Tax (PIT) and Corporate Income Tax (CIT) balances in mid-July, while the audited statements are not finalized until end of August. This timeline leaves minimal opportunity for advancing the signing of the audit opinion to before early September. Although the OAG has previously recommended that the CRA explore methods to improve the timeliness of its financial statements, little change has been implemented.

Developing the methodology for estimating tax revenues is a collaborative effort among the Canada Revenue Agency, the Department of Finance, and the Office of the Comptroller General.[^17] Should parliamentarians wish to access year-end financial statements by September 30th, these departments will need to revisit the existing methodology and timeline for finalizing tax revenue estimates.

Recommendations

Consistent with the Parliamentary Budget Officer’s mandate to promote fiscal transparency, the following provides recommendations for parliamentary consideration.

Amend the mandatory tabling date

To ensure the Public Accounts are tabled no later than six months after the close of the fiscal year, the PBO recommends that the FAA be amended to move the required release date of the Public Accounts by three months, from December 31st to September 30th.

The government has already indicated that a regular October 15th tabling date can readily be achieved. It has also demonstrated that it can reduce the time between signing and tabling the financial documents to fewer than the 30 business days it has stated necessary. As such, moving the deadline to September 30th could still allow for a timely release with minimal impact on the production process.

In the absence of such a legislative amendment, parliamentarians could request that the government explore improvements to meet a September 30th deadline. Doing so would align with parliamentary recommendations, OECD practices, and IMF’s guidelines for advanced practice in financial reporting. It would also meet the government’s stated interest in providing parliamentarians with timely and clear information about government finances.

Decouple tabling from parliamentary sessions

Decoupling the publication and the tabling of the Public Accounts in Parliament would make it easier to ensure timely publication, particularly during election years.

There are a few ways this could happen. Legislation could be amended to remove the requirement to table in Parliament, like many of the provinces. In Alberta and British Columbia, the responsible minister is required to make public the consolidated financial statements by June 30th and August 31st, respectively.[^18]

Alternatively, parliamentarians could also consider implementing a system like Manitoba. Under this model, the Public Accounts must be made public within six months after the end of each fiscal year.[^19] If their legislative assemblies are not sitting, then a copy of the Public Accounts must be laid before the assembly within 15 days after the beginning of the next sitting.

Request CRA review of tax estimates

There is evidence at both the provincial and international level that reliably estimating tax revenues can be done in a much timelier manner than current federal practices. For instance, New Zealand and Alberta, both of which report tax revenues on an accrual basis similar to Canada, publish their financial statements within four months after the end of the fiscal year.[^20] Alberta, in particular, ensures its year-end accounts are published by June 30th, two weeks before CRA finalizes its tax revenue estimates.

PBO is engaged in ongoing consultations with CRA regarding the trade-offs between timeliness and accuracy for preparing tax estimates. A significant challenge to moving up the timeline is that, currently, CRA uses taxes assessed up until May 31st of each year to ensure most of the actual data can be used. While CRA reviews its methodology every year, the last formal review on using earlier cut-off dates was conducted in 2014. This review was done internally, and the results were not made publicly available.

While there will always be trade-offs between the timeliness and accuracy of tax revenue estimates, understanding these trade-offs would help parliamentarians determine if an earlier publication date for the Public Accounts is desirable. Currently, PBO is not aware of any publicly available analysis on the impact of the tax assessment cut-off date on accuracy of tax estimates or whether the mid-July deadline for tax revenue estimates could be moved earlier.

The PBO recommends that the CRA undertakes a detailed review of the trade-offs between the timeliness and accuracy of its current methodology for producing tax estimates. This review should explore potential improvements for earlier preparation and publication of financial statements, including the trade-offs between timeliness and accuracy with an earlier tax assessment cut-off date and ways to shorten the timeline for producing tax revenue estimates. Engaging the CRA in such a study will help parliamentarians understand the existing challenges and identify practical solutions, aligning it more closely with best practices observed provincially and internationally.

Separate publication of audited and unaudited financial statements

The Public Accounts of Canada are split into three volumes. Volume 1 presents the audited consolidated financial statements of the Government of Canada along with other government analyses. Volumes 2 and 3 present the ministry break down of financial operations and supplementary information. Volumes 2 and 3 are not audited. Presently, all three volumes are published simultaneously.

Some provinces, such as Saskatchewan and New Brunswick, have adopted a practice of separating the publication of audited consolidated financial statements from the unaudited supplementary information to enable earlier publication of the former. For example, New Brunswick’s FAA requires that the audited consolidated financial statements in Volume 1 be laid before the Legislative Assembly by September 30th each year.[^21] Volume 2 of Public Accounts, which contains unaudited supplementary information, is to be laid before the Legislative Assembly by December 31st.

In light of these practices, Parliament may wish to consider requesting similar separation for the Public Accounts of Canada. Specifically, Volume 1 could be published in advance of Volumes 2 and 3 to ensure timely access to the audited financial statements.[^22]

Conclusion

The timely publication of the Public Accounts of Canada is essential for fostering transparency and accountability in government financial management. While Canada faces challenges in meeting international standards for advanced practice, there are viable options for improvement. PBO recommends to:

• Move the required release date of the Public Accounts by three months, from December 31st to September 30th;

• Permit the Government to release Public Accounts prior to their tabling in the House of Commons;

• Request the CRA lead a review of the trade-offs between timeliness and accuracy in its current methodology for producing tax estimates; and

• Require the Government to publish audited consolidated financial statements within six months of the fiscal year-end, with additional information and financial analysis later.

Implementing a combination of these changes would enhance Canada’s financial reporting practices, support transparency and accountability, and provide parliamentarians with more time for financial scrutiny, fostering more informed discussion and decision making.