Budget or Illusion?
Campbell government claims that it ran a surplus of $78 million
in 2008-2009. The Auditor General says that if the
books were kept in accordance with his interpretation
of Canadian generally accepted accounting standards, the surplus
would be reduced to just $8 million. Relative to $38.3 billion
in revenue the surplus, whichever figure is used, is almost
a lost decimal point - so small that slight errors could turn
the surplus into a deficit with the consequence of pay cheque
penalties for Campbell and his cabinet.
government does its accounting on an accrual, as opposed to
a cash, basis. That means, for example, that if a bill is
payable on March 31st but is not paid until April 1st, the
payment is recorded as an expense in the fiscal year that
ends March 31st rather than in the one that starts on April
1st. For routine business government knows exactly how much
it paid after March 31st that should have been recorded for
the year ended March 31st because it waits to close its books
until most of the transactions have been done. However, there
are always outstanding liabilities that must be estimated
and recorded as accruals. When the surplus is less than a
few tenths of one percent, how the accruals are calculated
can determine whether there is a surplus or a deficit. The
penalty that cabinet ministers face, not only on their pay
cheques but also politically, for running a deficit provides
a powerful incentive to make assumptions that keep the books
in the black. None of this is to question the professionalism
of the Auditor General or of any of the staff in the Ministry
of Finance, but it is to make clear what they take for granted.
2 on page 49 of the Public
Accounts discusses "measurement uncertainty"
and provides a table for items with a variability of over
$10 million. Accruals for personal income tax revenue are
shown as being accurate within plus or minus $300 million!
Perhaps it should have noted that the "surplus"
is variable within that range.
more than anything, the close call on whether the Campbell
government ran a surplus in 2008-2009 or not focuses attention
on the silly political games played with the Balanced Budget
and Ministerial Accountability Act, but those games have
served the Campbell government well in creating the illusion
that it alone has the skills to run the peanut stand. It is
time to shatter that illusion.