COVID Threatens Governments’ Fiscal Accountability

August 13, 2020

William B.P. Robson of C.D. Howe Institute

BRITISH COLUMBIA – Many of Canada’s senior governments have made impressive progress with the transparency and accessibility of their financial presentations, but these gains are under threat from the COVID pandemic, says a new report from the C.D. Howe Institute.

In “The ABCs of Fiscal Accountability: Grading Canada’s Senior Governments, 2020” authors William B.P. Robson and Farah Omran present the C.D. Howe Institute’s annual report card on the accessibility, timeliness and reliability of governments’ financial documents. The authors assign grades that reflect how readily an interested but non-expert user may find, understand and act on the information therein. While many governments have made reporting improvements over recent years, the failure of the federal government, as well as Newfoundland and Labrador, to produce budgets this spring shows that Canadians cannot take these improvements for granted.

Canada’s senior governments raise and spend huge amounts, and have legally unlimited capacity to borrow when their revenues fall short of their expenses. Holding public officials accountable for their use of these funds is a foundational task of representative governments. In pursuit of such accountability, citizens and taxpayers have a number of tools: the budgets governments present around the beginning of the fiscal year; the specific program estimates legislatures vote to approve and the audited financial statements governments present in their public accounts after year-end.

In this year’s report card, which covers financial statements for fiscal year 2018/19 and budgets and estimates for 2019/20, New Brunswick tops the class with an A; British Columbia and Saskatchewan, each with A–, come close behind. At the other end of the scale are Yukon, with a D+, and the Northwest Territories and Nunavut, each with D–. For the first year since the Institute began publishing its report card, there were no F grades.

Alberta, with a B+, and Ontario and Nova Scotia, each with B this year, could join the top rank next year with relatively small improvements, such as moving key numbers closer to the front of their budgets and more timely presentation and publication. The federal government, which earned a B–, could raise its grade with similar changes – but its failure so far to produce a budget at all for 2020/21 prefigures a failing grade next year.

“Two decades ago,” said Robson, “None of Canada’s senior governments budgeted and reported its revenues, expenses and bottom line on the same accounting basis; today, accounting consistent with public sector accounting standards is the rule.”

“We commend New Brunswick, a consistent high achiever, and note important improvements in our grades for Saskatchewan, Manitoba and Nunavut,” said Omran.

Robson noted that COVID-19 has prompted massive increases in spending and borrowing, and made fiscal projections harder. All the more reason, he said, to insist that governments provide consistent and timely numbers. “The pandemic must not serve as an excuse for skipping budgets or failing to provide reliable financial information,” he said. “The fiscal challenges after this crisis will make accountability more critical than ever.”

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