Think tank says Toronto earns a 'C', Surrey an 'A+' for budget process
Cities that are scored well on budget processes put out financial statements early, and give residents information in an easy-to-understand format, according to a recent study from C.D. Howe Institute.
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The City of Toronto has earned a barely passing C grade for its budgeting and public disclosure of financial data — up from an F last year — in a C.D. Howe Institute study being released Tuesday.
The Toronto-based think tank rated 28 Canadian cities and gave top marks to Surrey B.C., which squeaked by Peel Region with a stellar A-plus grade, up from a solid B last year.
C.D. Howe’s report “Fuzzy Finances: Grading the Reports of Canada’s Municipalities” argues that almost all of Canada’s bigger municipal governments “obscure financial reports” with inconsistent presentations of key numbers.
Those numbers are in annual budgets — the spending blueprints crafted by municipal councils and presented to the public using a different account system than that used for end-of-year financial statements, which record what actually happened with the city’s expenses and revenues.
The researchers once again scolded budget-makers for using cash accounting — which recognizes revenues when cash is received and expenses when they are paid — rather than accrual accounting, where revenues and expenses are recorded when earned, no matter when the money is actually received or paid out.
“By using cash rather than accrual accounting (cities) exaggerate infrastructure investment costs, hide the cost of pension obligations and make it hard to match the costs and benefits of municipal activities,” the report states. “Moreover, many municipalities approve their budgets after significant money has already been committed or spent in the fiscal year, do not publish their financial results in a timely way, and bury key numbers deep in their statements.”
The think tank also gave lower grades to municipalities that present gross, rather than net, figures in budgets that it says understate both spending and revenues.
Benjamin Dachis, C.D. Howe’s associate director of research, said Toronto’s ranking improved primarily because the city made key financial information more prominent in public budget materials.
“Last year’s headline totals were buried down around page 96 and that’s a big problem, it takes any reader ages to go through all the pages to get to key numbers, and this year people trying to understand Toronto’s budgets got those numbers earlier,” Dachis said.
“There needs to be a simple and clear presentation of overall municipal spending and the City of Toronto is getting better at that, no question.”
Peel Region did so well, he said, because politicians there set the budget and released financial statements quite early and gave residents information in an easy-to-understand format, he said.
“It’s very easy for any person to pick up their budget documents and financial reports, even though they’re on a different account basis, to be able to understand the differences between the two,” Dachis said.
“The only thing keeping (Peel) from a really perfect score is moving to a full accrual basis.”
Other GTA rankings were: York Region (A-minus, up from a B-plus); Markham (A-minus, up from a B); Brampton (B-minus, down from an A-minus); Mississauga (B, same as last year); Vaughan (B-minus, same as last year); and Durham (D-plus, same as last year).
Vancouver rounded out the top three, behind Surrey and Peel, with an A grade.
Durham tied Calgary for the worst ranking. Calgary tumbled all the way from an A-minus grade.
The institute's key rankings for municipalities to better inform residents, and improve their grades, are to use accrual counting for budgets and year-end statements, and to present them in easily understandable and comparable formats, and to show gross, not net, revenue and spending figures.
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