AUTUMN 2013
FMI
*
IGF JOURNAL
33
How Does Government Financial Reporting Drive
Policy Decisions?
Chris Killer
2013 FMI Ontario Scholarship Winner
In recent years, financial reporting has
changed drastically as a result of efforts of
governments to become more transparent
and accountable and has evolved into
having two distinct roles – reporting to the
public how money was spent and providing
information necessary for making sound
management decisions
1
. It’s the role of
the financial management professional
to make financial reporting relevant by
leveraging internal controls necessary for
effective financial reporting to provide
decision makers with sound advice backed
by strong financial analysis. This allows
decision makers to understand current
and future financial impacts of policy
decisions, to better understand the current
economic environment, and be held more
accountable for policy decisions, while
demonstrating value-for-money.
The transition to accrual accounting by
the Ontario government ensures Budgets
and Public Accounts more accurately
reflect the impact of economic events and
government decisions during a fiscal year.
By leveraging internal controls, financial
management professionals are able to
provide comprehensive year-over-year
budget comparisons and more accurately
forecast future budgets. In the current
environment, this is important as officials
attempt to tame growing expenditures
and balance the books by 2017-18
2
. With
a more accurate understanding of future
spending requirements, decision-makers
can shape policy decisions to lessen fiscal
impacts, while optimizing intended results.
Beginning in 2002-03, the Ontario
government began capitalizing capital
assets
3
, aligning annual asset expenses more
closely with asset use. This introduced the
concept of improved asset management,
whereby financial reporting could help
to better utilize asset use. For example,
by tracking government-owned vehicles,
we can determine optimal replacement
rates, thus allowing the avoidance of costly
repairs. This bringsmore certainty to policy
decision making, not leaving decisions
around asset purchases to judgement.
Capitalizing assets also introduces the
policy of amortizing assets over their
useful lives. Decision makers no longer
have to just consider what governments
can afford today, but also the impacts on
future budgets. For example, a policy
decision that requires the construction
of a $300 million facility will tie up
future budgets at the tune of $7.5 million
annually for the next 40 years. By itself,
this might not appear significant, but if
you consider that in 2011-12 the Ontario
government invested over $12 billion in
capital infrastructure expenditures
4
and
that resulting amortization expenses are a
statutory obligation that effectively tie up
future budgets, you can begin to see the
impact policy decisions have on future
budgets. In the current era of flat lined
budgets, this means that other program
expenditures, such as education, could be
crowded out.
Financial reporting holds governments
accountable as they must continually
demonstrate to the public the assessment
of value-for-money of policy decisions.
Financial
reporting
facilitates
the
assessment of funding decisions to make
sound recommendations that prioritize
funding to optimize the achievement of
results, while minimizing risk. The need
for stronger financial reporting will only
heighten as governments face ongoing
fiscal challenges and attempt to balance
budgets, while demonstrating sound and
well supported policy decision making.
Chris Killer is a full-time Master of
Business Administration (MBA) student
at the Schulich School of Business at
York University with plans to graduate by
December 2013. Having worked in the
Office of the Budget and Treasury Board in
the Ontario Ministry of Finance since 2008,
his professional background exemplifies
his commitment to financial management
work in the public sector. Chris started
as an intern with the Ontario Internship
Program and has progressively moved
into more senior positions, eventually
attaining the role of Senior Economist,
where he worked extensively with the
Ontario Provincial Controller Division and
other controllership units in program
ministries. In 2009, he was involved in the
implementation of the new minor tangible
capital asset policy across government,
which inspired him to pursue and achieve
his Certified Management Accounting
(CMA) designation in 2012. Upon
completion of his MBA, Chris plans to
return to the Ontario Government bringing
with him new financial management
ideas to strengthen financial reporting and
better support senior decision makers in
government.
1
Treasury Board of Canada Secretariat. Report on
the State of Comptrollership in the Government of
Canada.
2
2012 Ontario Budget
3
2002 Ontario Budget
4
2012 Ontario Budget
