Published On: Tuesday, 28 November 2017

Canadian Cities Need Cleaner Books for Taxpayer Accountability

Canadian Cities Need Cleaner Books for Taxpayer Accountability

- The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.

CANADA - Canada’s major cities tend to understate revenue and spending, wait too long to release budgets, and confuse taxpayers with obscure figures in their financial reports, finds a new study from the C.D. Howe Institute.

In the 2017 edition of the Institute’s annual municipal fiscal accountability report card, titled “Fuzzy Finances: Grading the Financial Reports of Canada’s Municipalities,” authors William Robson, Benjamin Dachis, and Farah Omran evaluate the country’s 28 largest municipalities on their financial presentations and assign letter grades to each of them.

“We found a dramatic divergence in the quality of financial reporting among municipalities,” says Robson. “Sadly, this year’s report card highlights some marked declines in municipal fiscal accountability.”

Calgary registered the largest year-over-year decline in budget clarity, dropping from A- in 2016 to D+ in 2017. Just like Durham Region, the city’s latest budget provides little information in a reader-friendly form and buries key numbers.

Toronto and Winnipeg both received a C in 2017, Ottawa scored a C+, and Edmonton came in with a B-. The best performers are Surrey and Vancouver in British Columbia, and Peel Region in Ontario. These municipalities approve their budgets and financial statements early, and they clearly present the overall fiscal footprint of the municipality near the beginning of their budgets.

The authors also evaluated three major Quebec cities – Gatineau, Laval, and Longueil – for the first time. These municipalities do not present the full scope of their spending in headline budget figures, a problem that is common to Montreal and Quebec City too.

The authors of the report recommend Canadian municipalities take the following steps to get closer to the A mark:

  • Adopt accrual accounting in budgets – municipal governments should present their annual budgets on the same accounting basis as their year-end financial statements.
  • Present headline figures early and prominently in budgets and financial reports –municipalities need to display the key numbers in a more accessible manner.
  • Show gross, consolidated, municipality-wide spending – municipal budgets should show gross spending and revenue so that users of financial statements have a comprehensive overview of a government’s fiscal footprint.
  • Explain deviations from budget plans – municipalities should prominently display tables reconciling year-end results with budget promises.
  • Publish budgets and financial reports in a timely manner – municipalities should approve expenditures before the government spending happens.

“Clearer, more consistent figures and better accountability for hitting or missing budget targets would bring the financial management of municipalities better into line with their fiscal impact and their importance in Canadians’ lives,” the authors conclude.