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Ottawa gets a B-minus in a rating by the C.D. Howe Institute that tries to assess how comprehensible the finances are in municipalities across Canada.
It’s not a fabulous score but it’s one of the better ones — only Niagara and Surrey got higher marks. And it’s artificially pushed down by the fact city council passed its 2015 budget in March, well into the fiscal year, because of the election in fall 2014. Had that not been the case, Ottawa would have had a solid B.
The idea is to judge how clear the city’s finances would be to an intelligent amateur trying to make sense of them. A $3-billion government is an inherently complicated thing, but you can present it as clearly as possible or not as clearly as possible.
Our city gives a fair summary of its budget figures in its highlights, for instance. Although parts of the city’s operations are hived off into separate budgets (such as for police and transit), you can get global grouped-together numbers that tell you the basics without a lot of trickery, which isn’t the case everywhere.
Also, and this is a biggie, each year’s budget presents the previous year’s budget for the same program along with a reckoning of how much it actually cost, not just how much it was projected to cost. That makes it simple to make a quick judgment about how realistic the new year’s budget figures are, based on past performance.
Ottawa falls down in the same place virtually all Canadian cities do, which is in the mismatch between its annual budgets and the way it compiles year-end financial statements.
The budgets use “cash accounting,” which is probably the way you deal with your own household spending: here’s what I’ve got in the bank and the money I expect to bring in this month, here’s what I owe on my credit cards and what I’m going to have to spend on food and rent and clothes, and that’s about it. This way of tracking money gives you certainty that you’ll be able to afford to pay your bills as they come due or gives you a heads-up that you won’t.
But the financial statements, which are meant to be after-action reports on all this stuff, use “accrual accounting.” Simplistically, that means smoothing out income and expenses over longer times, so they aren’t distorted by sudden spikes in revenue or costs or both. It’s the standard way for large enterprises to do their books. This way of tracking money gives you a better grasp of whether you’re making or losing money in general and is helpful for getting a handle on an organization’s overall financial health.
Each of them has legit uses. But the C.D. Howe people don’t like this use of two approaches at the same time because it makes it impossible to take a year’s budget and compare it with the end-of-year figures in any useful way. They won’t match up because they aren’t supposed to match up.
The result is especially striking in Ottawa, the report says.
Ontario’s Halton Region and Ottawa have the worst accuracy results among all municipalities: their average annual discrepancies between budgeted and actual spending were larger than 22 percent. No senior government’s discrepancies were anything like this big. Halton and Ottawa would be dead last in a survey of all major Canadian governments as well.
This sounds really bad, doesn’t it, as though Ottawa’s incompetent at predicting what it’s going to spend each year. In fact, it’s a result of those mismatched accounting systems. Specifically, how they handle the city’s $2-billion light-rail project.
The City of Ottawa booked all that spending in one year: the 2013 budget includes $1.8 billion for rail and another $20o million for the affiliated widening of the eastern Queensway. It shows up as a huge Pac-Man eating the capital budget that year:
It does not show up in the financial statements at the end of 2013, though. All that money did not actually go out the door at once. It gets paid as the Rideau Transit Group hits assorted construction and operating milestones.
The result: A huge “inaccuracy” in spending forecasts in 2013 because the budget was so much bigger than actual spending, and then smaller “inaccuracies” in the forecasts lasting years and years more (until at least 2018, maybe beyond) as the money gets paid out in the years in which it isn’t booked. It’s as if we tried to stuff most of an extra year’s budget into the city’s ledger: it’s bulging out in all kinds of weird places.
(Halton’s situation is similar, except that instead of a rail system they’re building a half-billion-dollar sewage plant.)
This doesn’t mean there’s any hanky-panky going on, or incompetence on the part of the budget team or city council. It does mean that it’s exceptionally difficult to tell whether there’s any hanky-panky going on by looking at Ottawa’s financial papers, and that’s the C.D. Howe Institute’s point.
Using cash accounting for budgeting also tends to create a bias in favour of having money available for expenses up front, which in the C.D. Howe people’s view means an unreasonable demand for development charges to pay for new infrastructure. Buyers of new homes need to cough up immediately to pay for roads and water pipes that will actually be used up over decades.
Switching to accrual accounting in budgeting would spread out the costs on the books and lead to fairer charges, in their view. That’s debatable, inasmuch as when you have to build a water main, you have to come up with the money at the time, not over 20 years. We’d either get on a track of charging everyone higher property taxes now or of borrowing more (and charging higher property taxes later to pay the loans off), but it would certainly be good for developers and the buyers of new houses and condos.
dreevely@ottawacitizen.com
twitter.com/davidreevely
查看原文...
It’s not a fabulous score but it’s one of the better ones — only Niagara and Surrey got higher marks. And it’s artificially pushed down by the fact city council passed its 2015 budget in March, well into the fiscal year, because of the election in fall 2014. Had that not been the case, Ottawa would have had a solid B.
The idea is to judge how clear the city’s finances would be to an intelligent amateur trying to make sense of them. A $3-billion government is an inherently complicated thing, but you can present it as clearly as possible or not as clearly as possible.
Our city gives a fair summary of its budget figures in its highlights, for instance. Although parts of the city’s operations are hived off into separate budgets (such as for police and transit), you can get global grouped-together numbers that tell you the basics without a lot of trickery, which isn’t the case everywhere.
Also, and this is a biggie, each year’s budget presents the previous year’s budget for the same program along with a reckoning of how much it actually cost, not just how much it was projected to cost. That makes it simple to make a quick judgment about how realistic the new year’s budget figures are, based on past performance.
Ottawa falls down in the same place virtually all Canadian cities do, which is in the mismatch between its annual budgets and the way it compiles year-end financial statements.
The budgets use “cash accounting,” which is probably the way you deal with your own household spending: here’s what I’ve got in the bank and the money I expect to bring in this month, here’s what I owe on my credit cards and what I’m going to have to spend on food and rent and clothes, and that’s about it. This way of tracking money gives you certainty that you’ll be able to afford to pay your bills as they come due or gives you a heads-up that you won’t.
But the financial statements, which are meant to be after-action reports on all this stuff, use “accrual accounting.” Simplistically, that means smoothing out income and expenses over longer times, so they aren’t distorted by sudden spikes in revenue or costs or both. It’s the standard way for large enterprises to do their books. This way of tracking money gives you a better grasp of whether you’re making or losing money in general and is helpful for getting a handle on an organization’s overall financial health.
Each of them has legit uses. But the C.D. Howe people don’t like this use of two approaches at the same time because it makes it impossible to take a year’s budget and compare it with the end-of-year figures in any useful way. They won’t match up because they aren’t supposed to match up.
The result is especially striking in Ottawa, the report says.
Ontario’s Halton Region and Ottawa have the worst accuracy results among all municipalities: their average annual discrepancies between budgeted and actual spending were larger than 22 percent. No senior government’s discrepancies were anything like this big. Halton and Ottawa would be dead last in a survey of all major Canadian governments as well.
This sounds really bad, doesn’t it, as though Ottawa’s incompetent at predicting what it’s going to spend each year. In fact, it’s a result of those mismatched accounting systems. Specifically, how they handle the city’s $2-billion light-rail project.
The City of Ottawa booked all that spending in one year: the 2013 budget includes $1.8 billion for rail and another $20o million for the affiliated widening of the eastern Queensway. It shows up as a huge Pac-Man eating the capital budget that year:
It does not show up in the financial statements at the end of 2013, though. All that money did not actually go out the door at once. It gets paid as the Rideau Transit Group hits assorted construction and operating milestones.
The result: A huge “inaccuracy” in spending forecasts in 2013 because the budget was so much bigger than actual spending, and then smaller “inaccuracies” in the forecasts lasting years and years more (until at least 2018, maybe beyond) as the money gets paid out in the years in which it isn’t booked. It’s as if we tried to stuff most of an extra year’s budget into the city’s ledger: it’s bulging out in all kinds of weird places.
(Halton’s situation is similar, except that instead of a rail system they’re building a half-billion-dollar sewage plant.)
This doesn’t mean there’s any hanky-panky going on, or incompetence on the part of the budget team or city council. It does mean that it’s exceptionally difficult to tell whether there’s any hanky-panky going on by looking at Ottawa’s financial papers, and that’s the C.D. Howe Institute’s point.
Using cash accounting for budgeting also tends to create a bias in favour of having money available for expenses up front, which in the C.D. Howe people’s view means an unreasonable demand for development charges to pay for new infrastructure. Buyers of new homes need to cough up immediately to pay for roads and water pipes that will actually be used up over decades.
Switching to accrual accounting in budgeting would spread out the costs on the books and lead to fairer charges, in their view. That’s debatable, inasmuch as when you have to build a water main, you have to come up with the money at the time, not over 20 years. We’d either get on a track of charging everyone higher property taxes now or of borrowing more (and charging higher property taxes later to pay the loans off), but it would certainly be good for developers and the buyers of new houses and condos.
dreevely@ottawacitizen.com
twitter.com/davidreevely
查看原文...
