Some Canadian cities need an accounting overhaul—their financial information is so inaccurate, disorganized, or out-of-date, that the cities’ administrations cannot make informed budget decisions, says the C.D. Howe Institute.
The study noted that most elected city officials making budget decisions are not accounting experts—neither are the residents of the city who might like to understand how their tax dollars are spent. Yet the way city accounting is published and presented is hard even for experts to understand, according to the study.
Big Gaps Between Budget, Actual Spending
One common problem is a lack of accurate and easy-to-understand comparison between a city’s projected budget and how much it actually spent.Many municipal councils develop their budgets by referencing past budgets, the study says. In other words, they look at the spending plans from the past rather than the actual amount spent.
The citizenry becomes apathetic, C.D. Howe says: “Why struggle to understand a budget that experience suggests you will not be able to compare with the outcome?”
“To pick a dramatic example, Calgary’s 2021 budget projected $7.15 billion in spending, while its 2021 financial statements showed $3.98 billion in expense. This 44 percent gap is large enough that an expert with time to spare might suspect an accounting discrepancy and start to read the fine print,” the study says.
“A non-expert, struggling with financial reporting that we awarded a grade of C+, might think the city is incompetent or publishing meaningless numbers,” the study continues.
In 9 of the 32 cities the study evaluated, the gap was more than 30 percent. But it’s not that these cities are greatly over-spending or under-spending, the study says. Rather, “many of the biggest differences reflect inconsistent accounting.”
Transparency
Well-organized financial information makes for transparency in the cities’ finances, C.D. Howe says.“A smart and motivated, but non-expert, councillor or taxpayer should be able to pick up a municipality’s budget and financial statements and quickly and easily find consolidated revenue and expense figures,” the study says.
The Epoch Times reached out to all the cities with the lowest score, a D-, and received a reply only from Halifax as of publication.
Jerry Blackwood, Halifax’s CFO, said in an emailed statement that he disagrees with the grade. City staff did not have a chance to talk to the think tank, he said, to explain the context of their budget process.
“One such example is that the C.D. Howe Institute gave the municipality a low grade for timeliness and transparency, despite the fact that Regional Council and municipal staff conduct over 25 public meetings and sessions during the annual budget process,” Blackwood said.
He said this process makes the budget transparent, giving the public an opportunity for input over the course of several months.
Ryan Hagey, Kitchener’s director of financial planning, said via email to The Epoch Times that C.D. Howe’s evaluation “does not consider criteria that could be argued are more relevant to public transparency.”
An example, he said, is “opportunities for public involvement (online or in-person) in the budget process, and the quality of the written content/presentations that help describe complex budget information in an understandable way.”
During the city’s budget process, he said, the city solicits input from the public on specific items.
