Need to Fix City Books

Getting the City Finances in better shape 

Recently, a research team at the C.D.Howe Institute delivered a report that highlights a serious problem about how the city finances are managed. While much of the public discussion focuses on the city budget how the city actually spent or received money gains scant public attention. Carol Goar referred to "Public in the Dark about City Finances" (See our Election 2010 page). We have read the report and copy below its recommendations. We suggest every voter should take some time to read it_ you don't need to be a CA or MBA. Councillor Carroll as departing Budget Committee Chair  might have been part of the city problem. She never spoke in public it seems about how close the city came to meeting its budget_ maybe she couldn't because her budgets don't match up to what happened.

Unbalanced Books: How to Improve Toronto’s Fiscal Accountability
 By Colin Busby, Benjamin Dachis and William B.P. Robson August 19, 2010
Recommendations for a Better BudgetAnnual budgets are cornerstones for governments – unique moments when programs and resources must be reconciled, and when elected representatives and voters are entitled to expect a coherent financial picture. The fact that Toronto’s budgets are so difficult to interpret does suggest a number of reforms.

First, Toronto should consolidate its capital and operating budgets, and vote on them together. Federal and provincial governments have moved to full accrual budgeting and accounting, in which capital projects appear on the balance sheet and are amortized year by year as they deliver their services – the amortization costs, of course, are added to yearly
budget expenses. Capital and operating budgets interact, and must ultimately be funded by the same taxes, transfers, and borrowing. Council needs to consider the whole financial picture at budget time.
Consolidated budgets would also make multi-year budgeting more feasible. Today’s capital spending has key implications for tomorrow’s capital and operating spending.8 A consolidated, multi-year budget would recognize the impact of long-term capital spending plans – forecasts of which are already part of Toronto’s capital budget – on long term revenue requirements.

Second, the accounting basis for the consolidated budget should be the same as that used in the audited year-end statements. Toronto, like all Canadian municipalities, is moving to full accrual accounting for financial reporting. The same accounting should apply to the budget. If it does not, comparing revenues and expenses from budget documents to
year-end reports will not become easier – it may well become harder.

Full accrual accounting in the budget would help prevent the city from counting federal or provincial transfers in ways that improve the budget’s appearance – for example,
by spreading the revenues from one-time cash transfers over arbitrary periods of time. Critically, it would permit the inclusion of reports on deviations from plans and the reasons for them in the year-end statements – an element that is now commonplace in the financial reports of the federal government and the provinces.9
Finally, councillors and Toronto’s citizens alike should insist that the city government adhere more closely to the budgets Council votes every year, so that the deviations revealed in the reconciliation between the consolidated budget and the audited financial statements become smaller, and justifications for the discrepancies that inevitably occur become
more transparent.
Notwithstanding the fiscal impact of the recent financial crisis and slump, federal and provincial governments in Canada have made important progress over the years in producing budgets and financial statements that are comparable with each other, and in communicating reasons for deviations from budget plans in ways that legislators and the public can readily understand and scrutinize. Toronto, Canada’s largest city and one of its largest governments, should meet the same standard.