Government of Alberta Annual Report
2. Other performance information
We found no exceptions when we applied specified auditing procedures to the core measures and supplemental information in the Measuring Up section of the Government of Alberta’s Annual Report. We found
exceptions in six ministries when we applied specified auditing procedures to ministry performance information in the 2002–2003 ministry annual reports—see page 43.
Overview
This section highlights the results of our examination of the Government of Alberta Annual Report.
Minister of Finance is responsible
The Minister of Finance is responsible for preparing the government fiscal and business plans and the consolidated annual report under the Government Accountability Act.
Government business plan and report
The government’s business plan identifies its core businesses and goals, key strategies, and measures and targets for each core business. The government’s fiscal plan outlines the consolidated budget to achieve the desired results in the business plan. The Government of Alberta Annual Report identifies the results achieved against the targets set in the business and fiscal plans.
Annual Report of the Auditor General of Alberta 2002–2003 38
Audits and recommendations Government of Alberta Annual Report
24 ministries contribute to government results
There are 24 ministries. Ministers and deputy ministers are responsible for managing their ministries and contributing to the achievement of government goals. Ministry business plans and reports provide information on the
ministry’s contribution to government results.
2002–2003
financial results In 2002–2003, the Government of Alberta received $23 billion in revenue and spent $21 billion. The following summarizes the significant revenues and expenses:
Non-renewable resource revenue 7,130 Transfer from Government of Canada 2,074
Website For more information on the government and its programs, see its website at www.gov.ab.ca.
Scope: what we did in our audits
1. We audited the government’s consolidated financial statements and all ministry financial statements for the year ended March 31, 2003. We also followed up our previous recommendation to improve corporate
government accounting policies.
2. We applied specified auditing procedures to the government’s performance information reported in the Measuring Up section of the government’s annual report and all ministry annual reports. We also examined the government’s progress in improving the results analysis in Measuring Up.
Audits and recommendations Government of Alberta Annual Report
We issued an unqualified auditor’s report on the government’s consolidated financial statements for the year ended March 31, 2003.
These financial statements consolidate the following entities of the government:
• Departments—24
• Regulated funds—13
• Provincial agencies—47
• Commercial enterprises—5
• Commercial Crown-controlled corporation—1
• Non-commercial Crown-controlled corporation—1
• Offices of the Legislative Assembly—6
Government uses disclosed basis of accounting
The government prepares its consolidated financial statements on a
disclosed basis of accounting. However, for several years we have said that Canadian generally accepted accounting principles (GAAP) are the
appropriate standards to assess whether financial reports are presented fairly. As reported in previous annual reports, we believe that there are still changes required to move the disclosed basis of accounting to GAAP.
Government will change method of accounting for capital assets in 2004
One significant change necessary is the method of accounting for capital assets. New Public Sector Accounting Board standards recommend that governments record capital assets in their statement of financial position for fiscal years beginning on or after April 1, 2005. The Department of Finance has stated that it will adopt this new standard and change the accounting policy to record capital assets in the province’s consolidated statement of financial position for the year ended March 31, 2004. Other areas still to be resolved are discussed in section 1.2.
21 of 24 ministry auditor’s reports include
reservations of opinion
We have applied GAAP in auditing the financial statements of ministries.
We issued auditor’s reports with no reservation of opinion for three
ministries (Children’s Services, Economic Development and Gaming). Our auditor’s reports on the financial statements of the remaining 21 ministries contained reservations of opinion. Further detail on the issues that led to these reservations is in section 1.2.
Annual Report of the Auditor General of Alberta 2002–2003 40
Audits and recommendations Government of Alberta Annual Report
1.2 Corporate government accounting policies Recommendation No. 2
We again recommend the Department of Finance change corporate government accounting policies to improve accountability
(2002—No. 15).
Background
The Department of Finance establishes corporate government accounting policies and reporting practices that ministries must follow. Last year, we again recommended (2002—No. 15) that the Department of Finance change corporate government accounting policies to improve
accountability. The government accepted this recommendation in principle and indicated that it would continue to review the accounting policies in conjunction with our Office and the work of the Public Sector Accounting Board (PSAB).
Findings Four accounting
issues resolved This year, the Department of Finance resolved the following accounting policy issues that had caused us to reserve our opinion in our auditor’s reports on several ministry financial statements:
• The financial statements of the Ministries of Health and Wellness and Sustainable Resource Development now include certain inventory assets that were previously not recorded.
• The Ministry of Human Resources and Employment now records the accrued benefits liability for the government’s share of the long-term disability plans’ actuarial deficiency.
• The Ministry of Learning adjusted its provision for provincial education tax adjustments and appeals.
• The Department of Finance revised its guidance on the appropriate financial statement disclosure for discontinued operations to comply with generally accepted accounting principles (GAAP).
Audit report
reservations However, our auditor’s reports on 21 of the 24 ministry financial
statements included reservations of opinion. The majority of them resulted from ministries’ compliance with corporate government accounting policies and reporting practices. All of these matters are summarized below.
Audits and recommendations Government of Alberta Annual Report
a) Reporting entity—since 1997, we have reported that universities, public colleges, technical institutes, regional health authorities and school boards have been inappropriately excluded from the reporting entity.
Ministry financial statements should include all assets, liabilities, revenues and expenses of entities that ministries control. The exclusion of these entities has a significant impact on the government consolidated financial statements and on the financial statements of four ministries.
PSAB issued new
guidance on issue Since our last Annual Report on the reporting entity issue, the PSAB has prepared revised guidance on this issue. The government has also indicated in its response to the Financial Management Commission Report that it will consider consolidating these entities for implementation by ministries in Budget 2006. The Department of Finance has indicated that it will prepare a work plan to progress this issue in the next year.
17 ministries understate their capital assets
b) Capital asset threshold—the financial statements of 17 ministries understate capital assets. As a result, we reserve our opinion in our auditor’s reports on these ministries. The understatement results because the government requires ministries to follow a corporate government accounting policy that is contrary to GAAP. The policy requires ministries to expense any capital asset—with a cost less than $15,000 and a useful life more than one year—in the year the ministry acquires it. GAAP, on the other hand, requires a ministry to amortize the asset over its useful life.
Total
understatement of government assets of $120 million
The amount of the understatement varies by ministry: it is large for some ministries, small for others. But the total effect on government and ministry financial statements is significant—we estimate an
understatement of the capital assets of the government and ministries of at least $120 million as at March 31, 2003. The government has proposed a new accounting policy to solve the matter. We expect a resolution by March 2004.
c) Liabilities—there were reservations of opinion in our auditor’s reports on the financial statements of:
• The Ministry of Justice—because liabilities for personal injury claims costs under the Motor Vehicle Accident Claims Act were not recorded.
• The Ministry of Solicitor General—because liabilities for recurring payments from the Victims of Crime Fund were not recorded.
Estimates for liabilities
• The Ministries of Environment, Infrastructure, and Transportation—
because liabilities for site restoration costs were not recorded.
• The Ministry of Learning—because the estimated liability for student loan remissions was overstated.
Annual Report of the Auditor General of Alberta 2002–2003 42
Audits and recommendations Government of Alberta Annual Report
Revenues and
expenses excluded d) Excluded operations—there is one reservation of opinion in our auditor’s report on the financial statements of the Ministry of Community Development because the Ministry’s revenue and expenses from
operations of certain cultural facilities are not included in the financial statements (see the ministry section of this report on page 82 for further details).
Related party transactions not disclosed
e) Related party transactions—the government’s practice is to disclose only transactions between organizations within the reporting entity as related party transactions. GAAP requires that related party disclosure include any organization that is subject to significant influence. We reserve our auditor’s opinion on the financial statements of three ministries (Health and Wellness, Community Development and Learning) because of this departure from GAAP. This issue is closely related to the reporting entity matter described above in (a). Accordingly, we will work with
management to resolve this issue as part of our discussions on the reporting entity.
Provisions are recorded in two ministry financial statements
f) Provisions for Swan Hills reclamation—our auditor’s reports on the financial statements of the Ministry of Environment and the Ministry of Sustainable Resource Development include an information paragraph. The financial statements of both ministries include certain provisions and expenses for reclamation activities of Swan Hills sites and it is uncertain which ministry should record these provisions (see the ministry sections of this report—pages 107 and 279 for further details).
Expenses did not comply with legislation
g) Legislative non-compliance—in addition to reserving our opinion in our auditor’s reports, we report all significant instances of non-compliance with legislation. In our auditor’s report for the Ministry of Community Development, we reported that certain expenses in the financial statements did not comply with the governing legislation (see the Ministry of
Community Development chapter of this report for further details—
page 82).
Implications and risks
Omissions or misstatements in financial statements will mislead users of the financial statements, including Members of the Legislative Assembly.
Audits and recommendations Government of Alberta Annual Report
2. Other performance information 2.1 Specified auditing procedures
No exceptions We found no exceptions when we completed specified auditing procedures on the core measures and supplemental information in the Measuring Up section of the Government of Alberta’s Annual Report.
Exceptions in our reports for five ministries
We found no exceptions when we completed specified auditing procedures on the performance information in the 2002–2003 ministry annual reports for 18 ministries. However, our reports for the ministries of Children’s Services, Economic Development, Energy, Government Services, Infrastructure and Transportation noted exceptions. These exceptions are described in the sections of those ministries in this Annual Report.
2.2 Results analysis in Measuring Up
We previously recommended (2001—No. 47) that the Department of Finance enhance the results analysis in Measuring Up by discussing how external factors influence the government’s performance results. This information helps users evaluate reported performance and is useful in explaining the reasons for variances.
Improved results analysis in Measuring Up
Management has implemented this recommendation. Measuring Up 2003 includes more discussion of the impact of external factors on performance than prior year reports. The discussion and analysis section for most goals now includes some disclosure of external factors affecting performance. In addition, the introduction to the report includes a high-level discussion illustrating how the actions of government and all Albertans affect core measure results.
Annual Report of the Auditor General of Alberta 2002–2003 44
Audits and recommendations Aboriginal Affairs and Northern Development