2002/03 Annual Service Plan Report Ministry of Finance

Ministry Role and Services

Introduction

The Ministry of Finance plays a pivotal role in the establishment, implementation and review of government's economic, fiscal and taxation policies and initiatives. The ministry develops, manages and monitors government's three-year fiscal plan and serves as the province's banker, accountant, risk and debt manager, major capital project overseer, and registrar of corporate assets, personal property and manufactured homes. In addition, the Minister of Finance chairs the Public Sector Employer's Council which helps to co-ordinate labour relations policies and practices across the public sector.

Our clients include Treasury Board, government ministries and agencies, boards and commissions, Crown corporations, businesses, investors and financial-sector agencies. Through its support of government's strategic plan and the New Era commitments, the ministry also broadly serves the people of British Columbia.

Ministry Vision, Mission and Values

The following vision, mission and values align closely with and support government's vision and goals as laid out in the Strategic Plan.

Vision

To be a responsive organization that is a model for leadership in promoting sound fiscal management and governance in an open and accountable public-sector environment.

Mission

To develop a sustainable fiscal plan, to prudently manage government finances, and to create a sound policy and regulatory framework that supports the creation of a strong and vibrant economy.

Values

Ministry Operating Context

Various economic, social and technological factors in the operating environment impacted the ministry as it managed government's three-year fiscal plan. To deal with these factors a number of strategies were utilized including the detailed monitoring and quarterly reporting of spending in ministries, a $210 million contingencies vote, a $750 million forecast allowance, presentations on the Balanced Budget and Ministerial Accountability Act, and the implementation of Enterprise-wide Risk Management (ERM) practices.

Capacity Building

The ministry sponsored ERM is an important tool across government for improving decision-making to manage risks and realize opportunities. Implementation of risk management has begun to provide the ministry and other organizations with enhanced capacities in the areas of policy making and decision making. As the ERM initiative matures the ministry will continue to emphasize:

• decision making that incorporates risk and opportunity assessments
• establishment of risk management techniques based upon best practices
• organization of the ministry to better manage risk
• development of essential skill sets
• common standards for quality and consistency of risk management practices

Risks and Opportunities

The following key internal and external factors impacted the ministry over the past year. While a number of these factors were beyond the control of the ministry, we worked to identify the risks and adjust strategies accordingly.

External Factors

Economic Environment: The British Columbia economy grew 1.8 per cent in 2002, after a 0.2 per cent decline in 2001. Growth was mainly due to increased domestic activity. Consumer spending, which accounts for about two-thirds of all economic activity in the province, benefited from continued low interest rates, growth in employment and federal and provincial tax cuts. Domestic demand remained relatively robust with housing starts and retail sales recording significant annual increases. British Columbia's export sector showed fairly week growth at 0.8 per cent in 2002, due largely to a relatively weak U.S. market as well as declines in key commodity prices such as lumber, pulp and natural gas.

Globalization: The continued globalization of economic and financial markets increased international competition for investment. Ontario and Alberta, for example, announced plans to continue with further business tax reductions to attract investment and encourage economic development.

Improved Service: British Columbians expect their government to be more responsive, accessible and cost effective.

Internal Factors

Streamlined Government: Government's legislated commitment to balance the budget beginning in 2004/05 and the Core Services Review encouraged an increased focus on streamlined and efficient delivery of programs and services.

Real Transparency and Accountability in Financial Reporting: Expansion of the government reporting entity to include schools, universities, colleges and health organizations, and government's commitment to fully implement GAAP by 2004/05 have challenged the affected ministries. These initiatives are among the first of their kind in Canada and required specialized knowledge and skill sets.

Update on New Era Commitments

The Ministry of Finance plays a leading role in many of government's New Era commitments related to:

• revitalizing the economy,
• restoring sound fiscal management, and
• ensuring funding for government priorities that put patients, students and people in need first

The following describes the ministry's progress in 2002/03 in relation to New Era commitments.

Core Business Areas

The ministry listed four core business areas in Service Plan 2002/03 – 2004/05. The next iteration, Service Plan 2003/04 – 2005/06, has aligned core business areas with the Estimates to allow for improved reporting in subsequent years. A table is included in the Appendices that links the core business areas to the ministry's programs and associated funding.

Core Business Area 1: Provide advice to support government's financial and economic objectives

The ministry assists government in reaching informed decisions by providing advice and support to the Minister of Finance, Treasury Board, Government Caucus Committees and Cabinet on financial, social, economic and tax policy issues along with intergovernmental fiscal arrangements. The ministry provides support to ministries and agencies for policy development and budget planning, and consolidates the capital plans of ministries, Crown corporations and agencies to enable government to manage its capital program within its fiscal framework. The Ministry of Finance also provides strategic advice and support for public sector labour relations.

Key Results/Outputs

• Developed a three-year fiscal plan to balance the budget annually beginning in 2004/05
• The province's annual operating deficit for the year ended March 31, 2003 was $3.169 billion, $1.231 billion less than budget. The overall provincial debt at March 31, 2003 was $4.171 billion less than planned
• The province maintained its competitive tax and business environment by ensuring it had the lowest personal income tax rate for the bottom two tax brackets and staying among the lowest three provinces in ranking of the top marginal personal income tax rate.
• Created Partnerships British Columbia to identify and facilitate public/private partnership opportunities in the delivery of public services and infrastructure, recognizing the ministry's commitment to fostering innovative service delivery solutions.
• Established a new capital asset management framework to foster innovative and affordable infrastructure projects.
• Realized $209 million in debt service savings for the government operating debt portfolio in 2002/03.
• Developed and released Budget 2003 on February 18, 2003 showing the fiscal plan is on target and ahead of schedule for 2002/03.
• Continued coordination of 2002/03 to 2005/06 collective bargaining mandate that will hold general wage increases to zero per cent, but still provide public sector employers with opportunities to address labour market issues, productivity efficiencies and ensure that agreements are consistent with government's polices. Significant agreements have been reached under this mandate in the past year at BC Hydro and at all four of B.C.'s universities.
• A new legislative framework was put in place for public sector executive compensation that will improve public accountability and see the maximum executive severance reduced from 24 to 18 months.

Core Business Area 2: Effective financial management and regulation

The Ministry of Finance ensures prudent management of taxpayer funds and the development of a regulatory environment that promotes investment. The ministry provides corporate and personal property registration services to support business in the province, manages government cash flows and debt to maximize investment returns and to minimize interest costs, provides a financial management policy framework for government, provides a Corporate Accounting and Reporting System for government and provides internal audit services to support ministry and cross government activities. The ministry also provides insurance, risk mitigation and business continuation planning services to the public sector.

Key Results/Outputs

• Achieved a stable outlook from the three credit rating agencies.
• Completed work to simplify the financial management policy framework. Consolidated three manuals into one, thereby achieving policy volume reductions of 75 per cent, which improves accessibility and understanding of the core government policies and practices.
• Developed the new Business Corporations Act, and implemented phase one of electronic corporate registrations by amendments to the current Company Act.
• Maintained low cost bank services at 66 per cent of the industry average rate for large corporate clients.
• Implemented 10 electronic payment services, which resulted in an online payment system for British Columbians, support for ministry electronic service delivery initiatives, administrative efficiencies and lower costs for government.
• Introduced the Enterprise Wide Risk Management program and delivered training to more than 2,000 ministry decision makers across government.
• Implemented the Oracle Fixed Assets module as part of the Corporate Accounting System to improve capital asset accounting and reporting.
• Released consultation papers to seek public input regarding updating financial services and real estate sector legislation.

Core Business Area 3: Comprehensive, timely and transparent financial reporting

The Ministry of Finance produces financial and economic reports to assist the public, investors and credit rating agencies in understanding government's fiscal position. These reports include the Budget, Three-Year Service Plan, the Estimates, Quarterly Reports, the Budget consultation document, the Financial and Economic Review, Public Accounts and Debt Statistics reports.

Key Results/Outputs

• Released three Quarterly Reports with full year forecasts.
• Led the development and introduction of the new Auditor General Act, which moves the province's auditing practices to the forefront in Canada and improves accountability and openness.
• Released the Public Accounts on July 11, 2002, two weeks earlier than the previous year, which exceeded the target date set of July 15 and the legislated target of August 31. This time frame resulted in British Columbia's Public Accounts being released ahead of eight other provinces.
• Published budget consultation document, including a three-year fiscal overview.
• Made all financial reports, including supplementary materials, available on the Internet.
• In concert with the independent Accounting Policy Advisory Committee, reviewed government's reporting entity in anticipation of the move to GAAP in 2004/05. Government has now committed to include schools, universities, colleges and health authorities effective fiscal 2004/05.
• In February 2003, the Minister of Finance received a leadership award from the Canadian Institute of Chartered Accountants for promoting the implementation of generally accepted accounting policies through legislation as part of the Budget Transparency and Accountability Act.

Core Business Area 4: Effective executive and administrative support services

The Ministry of Finance provides support to the Minister's and Deputy Minister's offices as well as strategic support to ministry operations, programs and external organizations in the areas of finance, human resources, information management, and information access and records services.

Key Results/Outputs

• Operated within budget during 2002/03 and met or exceeded its performance targets in eleven of fifteen areas.
• Implemented Enterprise-wide Risk Management program within the ministry.
• Completed staff survey and began implementation of recommendations addressing human resources issues to develop the Human Resources Management Plan.
• Improved timeliness of the ministry's response to inquiries from the public.