Government spending & accounting (split fm split)

[The Bread Guy]

I think we all need to understand how the government accounts for money.

Ah, but the infographic refers to "where your tax dollar goes" - different pot than "tax" dollars (even though there is only one "pocket").

Good discussion, although not related to using troops in photo ops, so I'm splitting to let you all carry on.

 

[Fishbone Jones]

You'd then have to be constantly changing the EI rates every month, creating a huge burden on both CRA and the corporations trying to keep their payroll straight.

Not really. It could be adjusted once a year. I'm not talking about holding an absolute zero line (impossible) but something within a few million +\-.

As far as being a burden, it could only take something as simple as changing the percentage in the accounting program.

And while we're talking about EI, the rules have to be equally applied across the country. No regional favouratism or special rules.

 

[Edward Campbell]

Not quite sure here if you mean you are not an accountant or if you mean you are not one of the people that think this is better transparency.

Well, I for one am not an accountant, but an economist, and one that thinks this type of accounting is in great part what led to a lot of government bloat. Let me explain with an example (amongst dozens).

In the sixties and seventies, before these "transparent accounting principles" came on line, if the RCMP or DoF (Fisheries - it was its own dept. then) had a problem that required divers, they would call on the Navy, and it would graciously send some of its divers to do the job, then come back to base after. Enter the accountants: "But you don't really know how much running the RCMP or Fisheries cost then because you are not including the value of Navy services". So now, the accountants force the Navy to bill the other departments for the services and those department have to pay the Navy for it.

You say fine, its just accounting, one department bills another so in the navy, you have the full cost of having divers, against which you have a revenue generated in the amount you billed the other Depts so their overall cost of operating a Navy is reduced by those amounts. In the RCMP or other depts, it is the other way around: They have an expense for diving but no extra revenue so their overall budget is now greater. Overall, the Canadian government budget remains the same - or so you would think.

But then, you start putting pressure on the various managers to cut costs and they start looking at their budget. Now, for its own reasons, training Navy divers and keeping them at a high level of readiness is a lot more expensive than civilian divers, so the billing per hour for those services is quite high. So the RCMP Commissioner looks at his budget and has a heart attack when he realizes that for half the price the Navy charges him, he can have his own three regional diving teams year round (whether that have anything to do or not) to cover his needs. So she goes for it. Now, the RCMP has reduced its budget but overall, the cost to government has increased, because the Navy still has to have divers and spend the money to train them.

These types of inter-departmental collaboration whither as a result and the government gets bigger, not to mention that it creates, in itself, a mentality in all departments of doing everything themselves because "it's coming out of our budget" so we need to own it and control it at all time.

This "transparency accounting" creates bloat in government. Period. and that is my not so humble opinion. So, like Recceguy, I would much rather that special programs supposed to be financed by "fees" remain accounted for separately. If that means that, in the "main" government accounts there is then a need to provision for the risk that the program would have to be bailed out at some point in any given year (i.e. the government has to  "reserve" one hundred millions because that is the value of the risk that it may have to loan it to support self financing program XYZ), that would be a good transparency measure: You could look at the reserve needs evolution over time to judge whether a self financing program is doing well or not in its management, and it would force the government to evaluate the risks associated with those programs every year.

Sorry, OGBD, I've been distracted for a few days and I am, obviously, being far less than clear.

First, I'm not an accountant.

Second, I agree that there is a price, often a high one, for transparency in government.

If I can use a political analogy, there are two "parties" in Ottawa where the national accounts are concerned:

    1. One, which has many senior bureaucrats as members, so let's call it the Clerk's Party, favours segregation of accounts ~ the way the UI was in 1940. The Clerk's Party does not believe that most bureaucrats are either crooks or mindless
        nincompoops who cannot be trusted to manage public money;

    2. The other wants transparency and I'll call it the Auditor's Party. They want programmes like EI brought into the public accounts that they are subject to full, public audit.

There are good, valid, Constitutional and 'machinery of government' reasons for keeping some accounts segregated; the questions are: how many? and which ones? Back in 1972 it was decided, by the government of the day, that transparency in the UI accounts, even at a price, would yield more political control, too.

I'm on the fence: my instinct is to be in the Clerk's Party, but I understand that transparency has both a social and a political value that is impossible to quantify in dollars.

 

[quadrapiper]

Not too sure how much of what the public considers "transparency" would affect the back-end management of funds, especially on the departmental service-sharing front. Betting what the public considers transparency has far more to do with a readily-followed, easily accessible, and straightforward paper trail, and a much more communicative Civil Service, than variations on accounting approaches.

 

[Colin Parkinson]

Not quite sure here if you mean you are not an accountant or if you mean you are not one of the people that think this is better transparency.

Well, I for one am not an accountant, but an economist, and one that thinks this type of accounting is in great part what led to a lot of government bloat. Let me explain with an example (amongst dozens).

In the sixties and seventies, before these "transparent accounting principles" came on line, if the RCMP or DoF (Fisheries - it was its own dept. then) had a problem that required divers, they would call on the Navy, and it would graciously send some of its divers to do the job, then come back to base after. Enter the accountants: "But you don't really know how much running the RCMP or Fisheries cost then because you are not including the value of Navy services". So now, the accountants force the Navy to bill the other departments for the services and those department have to pay the Navy for it.

You say fine, its just accounting, one department bills another so in the navy, you have the full cost of having divers, against which you have a revenue generated in the amount you billed the other Depts so their overall cost of operating a Navy is reduced by those amounts. In the RCMP or other depts, it is the other way around: They have an expense for diving but no extra revenue so their overall budget is now greater. Overall, the Canadian government budget remains the same - or so you would think.

But then, you start putting pressure on the various managers to cut costs and they start looking at their budget. Now, for its own reasons, training Navy divers and keeping them at a high level of readiness is a lot more expensive than civilian divers, so the billing per hour for those services is quite high. So the RCMP Commissioner looks at his budget and has a heart attack when he realizes that for half the price the Navy charges him, he can have his own three regional diving teams year round (whether that have anything to do or not) to cover his needs. So she goes for it. Now, the RCMP has reduced its budget but overall, the cost to government has increased, because the Navy still has to have divers and spend the money to train them.

These types of inter-departmental collaboration whither as a result and the government gets bigger, not to mention that it creates, in itself, a mentality in all departments of doing everything themselves because "it's coming out of our budget" so we need to own it and control it at all time.

This "transparency accounting" creates bloat in government. Period. and that is my not so humble opinion. So, like Recceguy, I would much rather that special programs supposed to be financed by "fees" remain accounted for separately. If that means that, in the "main" government accounts there is then a need to provision for the risk that the program would have to be bailed out at some point in any given year (i.e. the government has to  "reserve" one hundred millions because that is the value of the risk that it may have to loan it to support self financing program XYZ), that would be a good transparency measure: You could look at the reserve needs evolution over time to judge whether a self financing program is doing well or not in its management, and it would force the government to evaluate the risks associated with those programs every year.

Or when you request a vessel to assist in a Site Inspection. CCG says: "We are going to bill you the entire cost of the 150' vessel and crew", We said we will pay OT and extra fuel. They say no, in the end we went with a 22' boat and did the site inspection for about $600. Meanwhile the ship we asked for sits at the dock about 20 km away with the full crew earning their wage.  :

Happier notes, DFO has a RHIB boat and crew, but no money for fuel. I bought the fuel for the boat from my budget, they get to do a patrol and their stuff and I get to do my stuff at a fraction of renting a boat. No MOU or departmental policies needed, we know the guys and our local managers support such stuff. That's how most of the cost effectiveness in government happens, people knowing people outside their program and finding ways to work together, generally in spite of their departments.