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Robson, Omran - Fiscal Accountability – How to Improve Your Grades

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From: William Robson and Farah Omran

To: Canada’s Ministers and Deputy Ministers of Finance

Date: May 14, 2018

Re:  Fiscal Accountability – How to Improve Your Grades

Our latest report on how well, or poorly, Canada’s governments report their numbers prompted some happy public reactions to grades of A-plus, and some less happy private reactions to grades that were less impressive. Overall, we noted that government budgets and financial statements have become more reliable, clearer, and timelier in more recent years. For governments such as the Northwest Territories, Prince Edward Island and Ontario, who would like marks closer to top-of-the-class Alberta and New Brunswick, here is our how-to-improve-your-grades tip sheet.

To start with, curb the temptation to present misleading numbers. Observe Canadian Public Sector Accounting Standards (PSAS). All other documents, including budgets, spending estimates, in-year updates on the evolving situation, and reconciliation tables explaining differences between projections and outcomes, should rest on that same fundamental base.

Furthermore, present headline budget numbers consistent with those in your financial statements. Label them clearly. Put them up front – not buried on page 319 in Annex 2, as the federal government did in their latest budget. No government should confuse matters with more than one set of headline figures, or inconsistent aggregating and netting that make what should be a simple comparison of projections and results practically impossible. Legislators should insist on this change: a director of a for-profit business or a well-run charity who accepted such poor information – and increasingly few would – would not remain a director for long.

Give legislators estimates they can understand.. Estimates inconsistent with budgets and public accounts create a huge information gap for legislators. As with budgets, the inconsistency may arise because of different accounting methods, or because subcomponents prepared using similar accounting methods are added up differently in the estimates. Several Atlantic provinces generally set a good example in this regard, releasing estimates consistent with the budget projections simultaneously with their budgets. In western provinces, by contrast, the estimates generally come weeks later and are not easily reconciled to budget figures. If yours are like that, clean them up.

Be timely. Budgets and estimates presented and voted immediately before the fiscal year begins cannot get the scrutiny they deserve. Budgets and estimates presented and voted after the year has begun and after significant money has already been committed or spent are an affront to parliament. Produce timely updates as the year progresses – and, vitally, produce your audited financial statements weeks after the year closes, not months after.

Budgets, estimates and financial statements that are reliable, clear, and timely. That’s how to raise your grade for fiscal accountability to an A-plus.

Bill Robson is the President and CEO and Farah Omran is a junior policy analyst at the C.D. Howe Institute.

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters.

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