Background For the year 1997-98, the Treasury Department published standards for Ministries to follow in the preparation of their annual reports. The standards were developed in
collaboration with the Ministries. Through a collaborative process, improvements in the standards were developed and then published for use in preparing the 1998-99 Ministry annual reports. In my view, the standards are essentially sound.
The quality of annual reports is affected by the quality of business plans
I have again looked at the annual reports to assess compliance with the standards and to assess whether the information included is useful. In my view there continue to be opportunities for improvement. However, the quality of the information in the annual report is dependent on the quality of the plan it reports on. Put another way, since the report is against the plan, if financial and non-financial performance expectations are not clearly and completely set out in the plan, the report cannot do its job. Therefore, the recommendations I made above on business planning need to be addressed to establish the benchmarks for the preparation of a useful annual report.
Accountable organizations are outside the scope of the Treasury
Department’s annual report standards
The government’s accountability framework includes planning and reporting at the government-wide level, at the Ministry level and at the organization level. While the Government Accountability Act (GAA) and the Treasury Department’s standards provide direction on the first two levels of the framework, similar guidance is not available to a significant number of government organizations. The Provincial Treasurer has overall responsibility for the
accountability framework, but the responsibility for guidance to organizations has been given to the Minister to whom they are accountable.
The plans and reports at the organization level form the foundation for reporting at the Ministry and government-wide level. It is at the organization level where the work is actually being done that cost-effectiveness can best be managed.
Summary financial information should not be included in general purpose annual reports
I noted that annual reports of some accountable
organizations included summary financial information. Of significant concern to me was the inclusion of summary or
statements. I have more specific comments on this matter on page 37 of this section.
Guidance to accountable entities
Recommendation No. 5
It is recommended that Ministries, supported by the Treasury Department, provide guidance to accountable organizations on best practices for annual report
presentation.
Annual reports for some organizations are not as useful as they might be
Accountable entities are organizations, other than departments, to whom the government has delegated the authority to execute its programs. They take the form of provincial agencies, boards, commissions and delegated administrative organizations. In reviewing the annual reports of several of these entities I found considerable variation in quality. Also, I found the extent to which guidance had been provided by Ministries, on the content of the annual reports, varied considerably. Examples of deficiencies include the lack of comparison of budget to actual for financial information and the lack of non-financial performance information in the annual reports of accountable organizations. In short, published annual reports for some organizations are not as useful as they could be.
Improvement is needed to assist Minister and others to assess performance
The provision of adequate financial and non-financial performance information is essential to allow the relevant Minister and other users to assess the performance of an entity. In my view, providing consistent guidance on annual reports to accountable organizations will ensure that
Ministers are provided with the information they need.
As noted, the Treasury Department and Ministries have already worked together to develop standards for Ministry annual reports. I suggest that these standards be used as a basis for developing guidance for accountable organizations.
Some performance reports are incomplete
In order to meet the information requirements of certain stakeholders, some accountable organizations are publishing performance reports which do not include financial
statements, instead of publishing full annual reports. Others provide extracts from annual reports without referring to the existence of and where to obtain a copy of the full annual report. In my view, it is important that users have the opportunity to obtain full annual reports which include both financial and non-financial performance information.
Guidelines for summary financial information
The Treasury Department has added a new requirement to its Ministry Annual Report Standards for the year ended
March 31, 1999. It requires an extract to clearly indicate that it is not the full annual report, and to refer to the full report and how users can obtain a copy of it. However, the new requirement does not apply to a performance report issued by an accountable organization. Nor does the guidance indicate when summary information is appropriate or what
information should be included.
Summary financial information
Recommendation No. 6
It is recommended that the Treasury Department develop guidelines for Ministries and accountable
organizations regarding the use and content of summary financial information.
Summary financial information abbreviates full financial statements
Summary financial information is a shortened version of an entity’s traditional general purpose financial statements, sometimes referred to as full financial statements. It is also referred to by other terms such as condensed, abbreviated, simplified and summarized. Summary financial information is similar to interim financial statements prepared by some large public companies, but it has more credibility because it is derived from audited financial statements rather than unaudited interim financial information.
The usefulness of summary financial information is limited
Summary financial information is be provided by some public sector organization. By definition summary financial information excludes a great deal of information that is material to an assessment of performance. Therefore, summary financial information can meet only the most general information needs of any user. As a result, this practice needs to be carefully managed.
No standards in Canada At the present time there are no generally accepted standards relating to the content of summary financial information that we can refer to. In the absence of such standards I suggest the following guidelines be applied to the content, disclosure and presentation of summary financial information:
Recommendations for content, disclosure and presentation of summary financial information
Content:
• Summary financial information should generally include summary information on operations, financial position and changes in financial position. For example, a summarized statement of financial position would normally include the major headings from the financial statements such as totals of assets, restricted assets, liabilities, and net assets.
• Typically, the detailed notes in the full financial statements would not be included in the summary financial information. However, items vital to the understanding of the summary information should be included as briefly worded notes. Some examples of such items are changes in accounting principles or methods from the prior year, departures from generally accepted accounting principles, and significant events.
• The report should include an auditor’s report on the summary financial information.
• The notes to the summary financial information should include reference to any qualification in the auditor’s report on the full financial statements.
Disclosure:
The following information is important to a user’s understanding of the purpose and scope of the summary report and must be included in a prominent place in the report:
• That the financial information has been derived from the full financial statements.
• That the summary financial information cannot be expected to provide as comprehensive an understanding of the performance of the entity as the full financial statements.
• Where an interested user can obtain a copy of the financial statement.
• If the summary report includes extracts from a number of entity financial statements, this should be disclosed.
Presentation:
• Presentation of information in comparative form with the prior period and current year budget information.
• The titles or headings should include the word
“summary”, “condensed”, or “simplified” or another appropriate descriptor.
• The information should be presented in a balanced and objective manner.
Client Satisfaction Surveys In the 1997-98 annual report, criteria were set out for the preparation of client satisfaction surveys that produce meaningful results. Client satisfaction surveys used in preparing performance measures in Ministry annual reports for the year ended March 31, 1998, were reviewed for
compliance with the criteria. It was found that survey design has improved considerably, but there is still room for
improvement in execution and reporting. We will continue to monitor progress in this area.