Saskatchewan. cities get ‘F’ grades in CD Howe Institute budget report card

A national think tank calls for a clearer link between budgets and year-end financial statements.

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A national think tank criticizes the way Saskatchewan’s largest cities report their budget numbers.

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“It’s no fun at all to give low marks in this report card,” said Bill Robson, CEO of the CD Howe Institute, of a report on budget transparency in 31 Canadian municipalities, released this week.

Saskatoon and Regina were the only cities with “F” grades. Robson said that while both cities can boast of having “clean audits” and healthy surpluses, the institute’s evaluators are looking at how difficult it is for an ordinary person to find and make sense of key numbers in the their city’s budget, such as the amount of revenue, how much was spent, and whether there was a surplus.

Robson said the institute’s biggest problem with the two cities’ financial reports is the difference between their budgets, which are reported using cash accounting, and the year-end financial statements, which use cash accounting. of exercise.

He said the discrepancy means even a professional accountant can struggle to relate goals set in budgets to results reported in year-end statements.

Accrual accounting spreads the cost of an asset over its estimated life; cash accounting records all costs in advance. So, for example, a hypothetical $1 million stretch of road with an estimated life of 10 years appears as an initial expense of $1 million in cash accounting, but would be shown as a depreciation expense of $100,000 for each of the 10 years on the accrual basis. .

Robson said the institute views accrual accounting as superior. First, he said it’s “very simple” for roads, sewers and other infrastructure to last a long time, so they shouldn’t “disappear” from the books after a single charge.

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“It represents your service capacity. Cities are capital-intensive; this road belongs on the balance sheet as an asset because it is very important for the city which provides services associated with the fact that people can drive and walk on the roads,” he said, adding that the gradual reduction of the cost of an asset also gives a clear signal of when things need to be replaced.

Barry Lacey, executive director of financial strategy and sustainability for the City of Regina, said city staff will seek to provide a clearer reconciliation of year-end budgets and financials in light of the report. by CD Howe. He cautioned, however, that the debate between cash and accrual accounting systems is far from settled among finance professionals.

“I think there’s value in a cash-based budget. I think there’s a clearer line of sight for the citizen to understand why their taxes are the amount they are and what the city asks them,” he said.

Lacey also noted that the City of Regina maintains a AAA credit rating from Standard and Poor’s and has passed external audits.

City of Saskatoon Chief Financial Officer Clae Hack responded to a request for an interview with a written statement that CD Howe’s report was “nothing new.”

Hack pointed to a 2016 report prepared for Saskatoon City Council following that year’s version of the CD Howe Bulletin, which noted that the city’s current practice is a “pay-as-you-go” model. which sees funding for capital projects. collected before being spent. The report suggests that using accrual accounting would require taking on more debt to finance projects.

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