Monday, December 31, 2007

Quebec's government's new accounting standards

The following press-release is music to the result-based politic's person's ears:

Québec Undertakes an Ambitious Accounting Reform Québec, December 11, 2007 − The Minister of Finance, Minister for Government Services, Minister responsible for Government Administration and Chair of the Conseil du trésor, Monique Jérôme-Forget, today announced a major reform of the government’s accounting.

The report of the task force made public
When the 2007-2008 Budget was tabled, on May 24, 2007, the Minister had
announced the formation of the Task Force on Government Accounting. The Task
Force, consisting of representatives from the ministère des Finances, including the
Comptroller of Finance, and the Auditor General of Québec, was to propose a reform of the government’s accounting policies. Almost two months ahead of schedule, the Task Force Québec’s report was released along with the 2006-2007 Public Accounts, the Update on Québec’s Economic and Financial Situation (Fall 2007), and a document entitled The Québec Government’s Debt.
In keeping with its commitment to reform its accounting policies, the government has announced that it is acting on all the recommendations in the Task Force’s report, as of 2006-2007. “The education and the health networks henceforth will be consolidated in the government’s financial statements. This will make our accounting more transparent and fully compliant with the evolution of generally accepted accounting principles,” Minister Jérôme-Forget said.
Overall, the accounting reform announced today will have a positive financial impact of $89 million in 2006-2007 and a negative financial impact of $663 million on the budgetary balance in 2007-2008. The projected cost of the accounting reform in 2008-2009 will lower to $150 million.

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Amendments to certain statutes
The Task Force was also mandated to examine whether legislation on the balanced budget, the budgetary reserve and the Generations Fund should be amended. Once again, the government will act on the recommendations of the Task Force regarding these statutes. “We want to avoid any ambiguity that might exist in the future between the financial results, the application of these statutes and their objectives,” the Minister specified.
She also announced that she will be tabling a bill to amend the Balanced Budget Act whereby no amount may henceforth be charged to the debt without being posted to the deficit, unless for the purposes of compliance with a new standard of the Canadian Institute of Chartered Accountants (CICA). At the same time, the
government will amend the legislation on the budgetary reserve to simplify its
application and make it more similar to a stabilization reserve, as is the case in some provinces.
“Quebecers expect their government to be straight with them concerning the public finances. On that, my watchwords remain: rigor and transparency,” the Minister concluded.

Lastly, the government released a document entitled The Québec Government’s Debt that examines the concepts of debt used by various governments in Canada and by the credit-rating agencies. It also shows the impact of the reform of government accounting on the debt.

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Source: Catherine Poulin
Acting Press Relations Officer
Office of the Minister of Finance,
Minister for Government Services,
Minister responsible for Government Administration
and Chair of the Conseil du trésor
418 643-5270
514 873-5363"

It is great news because it will give Quebecois a more accurate view of the debt situation. As a result-based observer, I strongly believe that what gets measured gets done. The previous situation of concealing the Health and Education's debts into a separate account was problematic as it was not providing a single measure of the debt burden.
See below the progression of the debt, broken-down by its major entities (which were not included in the debt calculation before). Notice how fast the 'Health and social services and education networks' debt has progressed since 2003? I have yet to do more specific research into those spending but it would seem to indicate an operational - rather than capital - use of the debt.
And if that doesn't scare you enough, the total debt, sitting at 67.5% of Québec's GDP, does not include Québec's portion of the federal debt.

Source: Quebec Finance Minister. 2007-2008 Budget; Budget Plan (May 2007), ISBN 978-2-550-49864-3 (PDF), Section E, Table E-9. Percentage calculation from Author.