- “This year, our audit opinion on the Summary Financial Statements contains two
qualifications, or areas for concern. One involves the way that government records
certain revenues in future years, rather than when received and used. The other
qualification relates to prior years for how a Crown Corporation was classified.”
These issues are technical but generally accepted accounting principles (GAAP) provide a consistent way of presenting financial positions of organizations at particular times, as well as the results of operations for the periods reported. Without this framework, stakeholders are less able to determine how money is managed. The Wall Street Journal referred to GAAP as an idea that is “so simple yet so radical.”
Governments, because they make rules, don’t feel compelled always to follow rules. This was noted by Alana James, a BC health ministry lawyer who wrote about the attitude she perceived among colleagues,
“…it’s unfortunate that we don’t follow the law but that we plan on changing the
legislation at some point so that we will.”
The Auditor General draws attention to information already known by Northern Insight readers. She reports that, in fiscal year 2014, oil and gas companies deducted $568 million from royalties that would otherwise have been payable and that a further $1.25 billion in credits remain available for deductions in the future. That unrecorded liability increased by $316 million from 2013 so, in one year, oil and gas extractors gained the current and future benefit of $903 million of incentives, a subsidy that touches $1.3 billion if ministry expenditures are included.
Ms. Bellringer takes a direct shot at public-private partnerships that Liberals claimed would save taxpayer money,
- “it is interesting to note that while government’s weighted average cost of
borrowing is approximately 4%, on the $2.3 billion that government borrowed through
public private partnerships this is 7.5%.
Goodbye $80,500,000 a year.
BC Ferries, while not paying interest as high as P3 operations, paid an average of 5.5% on its $1.346 billion in term debt. The premium over government borrowing rates burdened the ferry company with an extra $20.2 million interest in FY 2014. Multiply that over the 11-year life of the “private” ferry corporation and you’re talking significant money drawn from the pockets of coastal commuters.
The Auditor-General draws attention to gilding that made 2014 financials deceptively attractive,
- “When assessing financial performance, it is important to look for, and understand,
the impact of one-off events, such as the sale of government owned land or buildings.
Last year, government earned $601 million from the sale of assets: $311 million from
government’s program to release surplus assets, such as two former gravel pits in
Surrey and a surplus parcel of land in Kamloops; and, close to $290 million from the
Little Mountain property in Vancouver. …Although only a small percentage of total
revenues, the gain is a significant part of the bottom line for the year, which was
reported as a $353 million surplus in the 2013/14 Summary Financial Statements.”
There are numerous other items worthy of comment in the auditor’s report, including BC Hydro’s use of expense deferrals. These inflated the utility’s equity and allowed government to scoop extra funds and enjoy more attractive headlines when deficits or surpluses are reported. I will be writing about this separately but will note a comparison of deferrals with an eastern utility that owns assets three times the value of the power company in this province:
- BC Hydro $4.7 billion Hydro-Québec $8 million
By the way, I will be on CFAX1070 Monday at 2pm to talk with Ian Jessop about the Auditor-General’s report.