One of Parliament’s fundamental roles is to review and approve the government’s taxation and spending plans. To fulfill this role, parliamentarians follow the parliamentary financial cycle, which consists of a continuous loop of activities that take place throughout the calendar year. Because the federal government’s fiscal year begins on 1 April and ends on 31 March, activities that take place during a single calendar year may relate to different fiscal years. For example, in one calendar year, the budget sets out priorities for the coming fiscal year, while the Public Accounts of Canada outline spending that took place in the previous fiscal year.
Thus, it may be helpful to consider the financial cycle in relation to activities that take place before, during and after the fiscal year. In this way, it can be seen how each element contributes to parliamentary review and approval of government spending for a given fiscal year and takes place over several calendar years.
The financial cycle can also be categorized in terms of the House of Commons’ supply periods, which end on 26 March, 23 June and 10 December. Before the end of each period, the House of Commons votes on whether it agrees with, or concurs in, the estimates and the associated appropriation bills that are before it, which are then sent to the Senate for review and approval.
In the fall prior to the fiscal year, the House of Commons Standing Committee on Finance holds pre-budget consultations with Canadians and makes recommendations to the Minister of Finance for the government’s upcoming budget.
Usually in February or March, the Minister of Finance presents the government’s budget, which outlines the government’s taxation and spending priorities for the coming fiscal year. However, a budget does not authorize the government to change taxation or spend funds, and there is no specific timeline or requirement for the presentation of a budget.
To change taxation, the government introduces ways and means motions that outline the proposed changes. These changes are then enacted by Parliament through the review and approval of legislation, such as budget implementation bills that the government introduces following the budget.
To spend funds, the government must request Parliament’s authorization through the review and approval of appropriation bills. To help Parliament understand and scrutinize its spending plans, the government prepares and presents main and supplementary estimates, which provide the spending plans of each department. In addition, the government receives authorization for statutory expenditures, such as the Canada Health Transfer, through previously adopted legislation. The legislative authority for statutory expenditures is ongoing and does not need annual approval from Parliament.
Before the beginning of the fiscal year, the House of Commons approves interim supply. As full supply is not granted until June, the government needs authorization to spend funds during the first three months of the fiscal year. Thus, interim supply is usually three-twelfths of the amount outlined in the main estimates.
During the fiscal year, once the main estimates have been tabled in the House of Commons, they are referred to the relevant standing committees, which have the opportunity to review, vote and report on them by 31 May. The Standing Senate Committee on National Finance also reviews and prepares reports on the estimates.
In June, the House of Commons approves full supply, which is the amount laid out in the main estimates, less interim supply. Once approved, the appropriation bill is sent to the Senate for consideration and approval.
As the main estimates do not include the government’s complete spending needs for the year, such as unanticipated spending needs or items announced in the budget, the government also presents supplementary estimates to Parliament for review and approval. Although there is no set schedule or limit to the number of supplementary estimates, the government tends to present supplementary estimates in May, November and February, and each set of supplementary estimates receives an alphabetical designation – A, B or C. Supplementary estimates are also referred to committees for review and receive approval through an appropriation bill at the end of the relevant supply period.
In the fall, the Minister of Finance presents an economic and fiscal update, which provides mid-year information on the country’s economic growth and the state of the government’s finances.
Throughout the year, federal departments, agencies and Crown corporations prepare and make public quarterly financial reports, which compare planned with actual expenditures.
Sometime after the end of the fiscal year (usually in October), the government presents its public accounts, which outline the government’s actual spending during the fiscal year. The public accounts also provide a snapshot of the government’s financial position at the end of the fiscal year – its liabilities, assets and net debt. The public accounts are referred to the House of Commons Standing Committee on Public Accounts.
After the public accounts have been presented, the government tables its Debt Management Report, which presents how it managed the federal debt in the previous fiscal year.
Also in the fall, the government releases departmental results reports for each department or agency. These reports describe achievements relative to the expectations outlined in the corresponding departmental plans presented just before the beginning of the previous fiscal year.
After the completion of the fiscal year, the government’s consolidated financial statements are audited by the Auditor General of Canada.
Read the full text of the HillStudy: The Parliamentary Financial Cycle
Author: Shaowei Pu, Library of Parliament