From A to F: Grading the Fiscal Transparency of Canada’s Cities, 2019

Robson, William B. P.; Omran, Farah

doi:10.2139/ssrn.3503551

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“…Budgets and financial statements often appear late. Robson and Omran (2019c) evaluates municipal budgets and financial statements by a number of criteria that affect their value to a user who is numerate but is not an expert in accounting.…”

Section: Obstacles To Understanding Municipal Budgetsmentioning

confidence: 99%

“…As the C.D. Howe Institute's 2019 report card on Canada's most populous municipalities (Robson and Omran 2019c) documents, most local governments present budget information that even experts find hard to reconcile with their financial results, and that would stump non-experts. Most users of municipal budgets can understand neither the upcoming year's plans in relation to the recent past, nor how closely the city's results after the year has ended resemble that year's budget plans.…”

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confidence: 99%

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What You See is Not What You Get: Budgets versus Results in Canada’s Major Cities, 2019

Robson¹,

Omran²

2020

SSRN Journal

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The budgets of most big cities in Canada give councillors, ratepayers and voters little useful insight about their city's spending plans or its projected bottom line. A typical, non-expert reader would conclude that Canada's biggest cities missed their spending targets by 8 percent annually since 2010, and ran surpluses of $8 billion over expectations in 2018 alone. More informative budgets would improve accountability, and foster smarter municipal financial management.Canada's municipalities deliver services that are critical to quality of life, and require major commitments of resources in taxes, fees and intergovernmental transfers. But their budgeting practices, and people's ability to measure their municipality's performance against its budget commitments, are nowhere near the level appropriate to this importance. This report looks at the annual projections for spending and the bottom line (revenues minus expenses) in the budgets of 31 of Canada's largest municipalities over the period from 2010 to 2018, and the results reported in those municipalities' year-end financial statements. It asks what a councillor, or taxpayer, or citizen -a person who is motivated and numerate, but non-expert -would infer from each budget, and would conclude when comparing the budget to the results.In most of the municipalities we look at, simply finding informative numbers about spending plans in budgets is a challenge: less than one-third of their budget documents contain numbers using the same public sector accounting standards (PSAS) used in the year-end financial statements. Users who do put the time and effort into finding numbers describing their municipality's operating and capital spending plans, and compare them to the expenses reported after year end, would typically conclude that the municipality did a terrible job of hitting its budget projections. Comparing plans in cities' budget documents to results in cities' financial statements, users would find that the difference between spending growth as projected in budgets and expenses growth published after year-end averaged 8 percent annually. A key contributor to these discrepancies is the fact that cities typically budget using different accounting practices than the PSAS-consistent rules they follow in publishing their results. Critically, municipal budgets show investments in capital assets like buildings, sewers and transit on a cash, upfront basis while the financial statements amortize the cost over years. Comparing budgets on a PSAS basis to results yields an average annual gap between plans and outcomes of 4 percent, and suggests that cities have a tendency to undershoot their budgeted spending.As for the bottom line, the budget debate in most municipalities, and the assumptions of most councillors, citizens and journalists, emphasize the need to "balance the operating budget," and downplays the separate capital budget. PSAS do not separate "operating" and "capital" -accrual accounting writes capital down as it delivers its services (amortization), and produce...

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Section: Obstacles To Understanding Municipal Budgetsmentioning

confidence: 99%

mentioning

confidence: 99%