Windsor, London get low marks for 'baffling' financial reporting
The conclusion of a new study looking at financial reporting in some of the biggest Canadian cities — including Windsor and London — is that "municipal budgeting in Canada is bad."
The C.D. Howe Institute ranked 31 municipalities in a report called "Show Us the Numbers."
"Unfortunately, we found that in nearly all these cities, the numbers are skewed, misleading — and quite late," said Farah Omran, co-author of the report and a policy analyst at the Toronto-based think tank.
Omran said Windsor and London exhibited many of the same issues as other cities.
"The most important fault is using inconsistent accounting between their budget documents and year-end financial statements," she said, explaining the budgets use cash basis accounting, while the year-end reports use accrual basis accounting.
"[This prevents] the user from being able to compare spending intentions with actual year-end results."
To explain the difference in the accounting styles, Omran gave the example of when a municipality decides to purchase of a building.
"In cash accounting, that whole expense will be recorded as a cash outlay of that year," she said.
"Whereas in accrual accounting, it considers it an asset, so when the government actually purchases that building it is an asset that will be used for a prolonged time, and amortizes that asset over the useful lifespan."
Omran also chides the two southwestern cities for the tardiness of their year-end reporting.
"It took London six months to publish its year-end financial statements, whereas it took Windsor almost nine months to do it — that's almost a year to prepare the documents and show them to the public," she said.
"Other mistakes are reporting net numbers, [and] hiding key numbers very deep in the documents."
Only one municipality, Surrey, B.C., received the top "A+" grade from the report, which praised the Greater Vancouver city for its consistent accounting methods, timely reporting and being upfront with key numbers.
Omran said following Surrey's lead shouldn't take too much extra work — or money. The reason is because the two municipalities already use the accrual accounting method in their financial statements, which is preferred.
"The most important [thing is to] use the consistent accounting between budget and year-end financial statements," she said.
Tap the player above to hear Omran discuss the findings of her report with Afternoon Drive host Chris dela Torre.
