B.C. government should have recorded surplus: AG

Auditor general continues to question way province records federal transfers

BC Auditor General Michael Pickup. | Office of AG

B.C.’s Ministry of Finance appears to be going a pretty good job of bean counting, with one exception, according to a BC Auditor General's report.

The AG’s office spent 50,000 hours poring over the B.C. government's 2019-20 financial statements, and found but a single quibble with the way the Ministry of Finance does its accounting.

It’s a big one, though, says Auditor General Michael Pickup: a $5.4 billion surplus that shows up on provincial financial statements as a $300 million deficit.

The AG and B.C. government disagree on how the government records the receipt and spending of money it receives from the federal government, mostly for capital works projects.

If the province followed the Generally Accepted Accounting Principles (GAAP) for public bodies, the way other governments do, it should have recorded a $5.4 billion surplus for the 2019-20 fiscal year, thanks to $5.7 billion it has received from the federal government, Pickup says.

But because of the way the province reports those federal transfers – spreading them out over lifetimes of the projects they help finance – the province recorded a $300 million deficit for 2019-20.

It’s a quibble that the AG’s office has been having with the Ministry of Finance for nine years running, so it’s not likely to change.

“Government has not recorded this revenue according to generally accepted accounting principles,” Pickup said in a press conference Tuesday. “Not following these accounting standards result in under-reported revenues, which I believe clouds the province’s true financial position.”

When the province receives federal funding to build a hospital or some other public works, it doesn’t report that revenue in its financial statements when it is actually received and spent. It may spread out the reporting of that revenue over a period of decades.

In 2010, government changed the Budget Transparency and Accountability Act to allow it to report revenues in a way that does not comply with Generally Accepted Accounting Principles, according to the AG.

The provincial government stands behind its accounting, however.

In response to the AG’s report, the B.C. government responds: “The province maintains its longstanding policy of recognizing restricted contributions in the same period that programs and services are delivered because it best meets the objective of public accountability.”

The AG’s report notes that next year’s financial statements for 2020-21 will necessarily be greatly affected by the COVID-19 pandemic, which resulted in increased spending and the deferral of billions in revenue from things like the PST, the new employers health tax and fuel and carbon taxes.

nbennett@biv.com

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