B.C’s budget surplus would be $7.2 billion, and not the $1.5 billion budget surplus B.C. Finance Minister Carole James reported July 19, if government used independent accounting standards, the auditor general said Friday.
An opinion released by Auditor General Carol Bellringer said the public accounts released by James on Thursday state the government's financial performance fairly with that one exception.
Bellringer differs with Premier John Horgan’s government on how it records revenue that it receives primarily from the federal government.
“Government does not record this revenue according to independent accounting standards. Instead, government records the revenues over a much longer period than the standards allow, meaning these revenues have been under-reported and cloud the province's true financial position,” a news release said.
Bellringer said that as of March 31, 2019, government has deferred $5.7 billion in revenue over the years.
“To correct its financial statements, government should have recorded the $5.7 billion as revenue for a total reported surplus of $7.2 billion,” the statement said.
Bellringer said generally accepted accounting principles (GAAP) require governments to record funds transferred from other levels of government for projects as revenue in their books as soon as the asset is bought or built. However, under special circumstances, revenue can be deferred.
For example, Bellringer’s report explained, if Victoria “receives $40 million to build a highway in 2019, it doesn’t record the $40 million as revenue in 2019. Instead, it records $1 million a year over the 40-year life of the highway. Government created a regulation (BC Regulation 198/2011, as mentioned previously) that requires taxpayer supported Crown corporations to record the money they receive from other levels of government the same way the B.C. government records it, rather than in accordance with GAAP.”
That, the report explained, is where the clouding comes into play.
James said B.C. posted the $1.5 billion budget surplus for 2018-19 stemming in part from a $2.9 billion increase in revenues over budgeted projections.
“We are on a very strong fiscal footing,” James said. “I’m really proud of the work we’ve done.”
Government-released figures show B.C. now has a total debt of $65.9 billion – $3.06 billion lower than estimated in the budget, but an increase from $64.9 billion in debt the previous year.
James said increased revenue to allow for a balanced budget came about in part because B.C’s economy grew by an estimated 2.4% in the 2018 calendar year. The province had Canada’s third-highest growth.
Total revenue was $57.1 billion, up $5 billion from the previous year, and up significantly from the $46 billion in 2014-15.
Bellringer said the audit is her office’s largest, looking at $57 billion in revenue, $56 billion in expenses, $95 billion in assets and $87 billion in liabilities.
“It’s a massive undertaking,” she said.
The auditor general’s report can be read here.
The public accounts for 2018-19 can be viewed here.