Numbers You Can Trust? The Fiscal Accountability of Canada's Senior Governments, 2017

Abstract

Canadians entrust their governments with major responsibilities, and pay taxes and underwrite borrowing to fund them. Financial reports are a vital tool for understanding governments’ financial plans and activities. Over the past 15 years, federal, provincial and territorial governments have done much to improve the transparency of their reports, and most of them have come closer to delivering on their budget promises. Yet too many continue to present opaque numbers, fail to satisfy their legislative auditors, take too long to present budgets or report, and spend far more than they budgeted. This latest edition of the C.D. Howe Institute’s annual report on the fiscal accountability of Canada’s senior governments assesses the quality of their financial information, and their success or failure in achieving their budgetary goals over the past 15 years. In looking at the quality of governments’ financial reporting, it asks whether an intelligent and motivated non-expert – a citizen, taxpayer or legislator – can get valid, timely and readily understood figures for total revenue and spending in the budget each government presents at the beginning of the year, and in the financial statements released with its public accounts at the end of the year. Alberta and New Brunswick earn the top scores for the quality and timeliness of their budgets and public accounts, with the federal government and British Columbia also doing well. Newfoundland and Labrador and Nova Scotia, though not in the top tier, have improved markedly. Quebec and Prince Edward Island do relatively poorly among the provinces, and Northwest Territories and Nunavut also present figures that our idealized reader would struggle to find and interpret. On the question of accuracy in hitting budget targets, the overall record is one of significant overshoots of both spending and revenue. On average, over all governments and all 15 years, governments spent 2.3 percent more than budgeted, which cumulates to a remarkable $69 billion. The Prairie provinces and the territories recorded the worst overruns; Ontario and Quebec did much better. Over the same period, revenues also overshot projections by 2.3 percent annually, cumulating to $95 billion more than budgeted. Although the overshoots tended to get smaller over the 15 years, a suspicious pattern of in-year spending “surprises” coinciding with in-year revenue “surprises” suggests less than prudent management of public funds. Legislators and Canadians generally should push senior governments to produce timelier, more transparent and reliable financial information, and should use that information to hold governments to account – at budget time, and throughout the fiscal year.