Credibility on the (Bottom) Line: The Fiscal Accountability of Canada's Senior Governments, 2013

24 Pages Posted: 25 Mar 2014

Date Written: March 24, 2014

Abstract

Each spring, Canada’s federal, provincial and territorial legislatures vote budgets that set out their spending and revenue goals for the fiscal year. Budget votes are critical for holding governments accountable to legislators, and in turn to voters and taxpayers. Over the last decade, however, Canada’s senior governments have overshot their spending targets by some $47 billion combined. More accuracy in hitting budgeted amounts would have made today’s taxes and public debt lower. A related problem is deficiencies in financial reporting. In many provinces and territories, the average citizen or legislator would have trouble simply finding and comparing the key numbers in the budget and in the end-of-year financial reports. While Ottawa and Ontario prepare their principal financial documents using the same basis of accounting, display the relevant numbers prominently, and provide informative reconciliations between budgets and results, in most of the other provinces and territories, inconsistent presentations of multiple revenue and spending figures would stump any but the most expert reader. Our 2013 fiscal accountability survey of Canada’s senior governments’ evaluates the clarity and adherence to public sector accounting standards in each government’s budgets and public accounts, and assigns letter grades to each one. It also shows the results of a straightforward attempt to overcome varied financial presentations across the country by comparing budgeted to actual changes in spending and revenue. This exercise shows a substantial overshoot of spending – and an even larger overshoot of projected revenues – over the past decade. Expressed as percentages of their budgeted expenditures in the current fiscal year to allow comparisons, Alberta and Saskatchewan showed the biggest overshoots among the provinces – averaging about 4 and 5 percent – over the period, while Yukon and Nunavut were even worse. The news is not all bad, however. Over the most recent five years, most of Canada’s senior governments came closer to both their spending and revenue targets than they had during the previous five years. Our survey concludes with several suggestions about how Canada’s senior governments can improve their financial reporting, and with it the ability of legislators and voters to hold them to account for hitting their budget targets.

Keywords: Fiscal Policy, Tax Competitiveness

JEL Classification: H20, H30, H60, H61, H68

Suggested Citation

Busby, Colin and Robson, William B. P., Credibility on the (Bottom) Line: The Fiscal Accountability of Canada's Senior Governments, 2013 (March 24, 2014). C.D. Howe Institute Commentary 404. Available at SSRN: https://ssrn.com/abstract=2414106 or http://dx.doi.org/10.2139/ssrn.2414106

Colin Busby (Contact Author)

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

William B. P. Robson

C.D. Howe Institute ( email )

67 Yonge Street
Suite 300
Toronto, Ontario M5E 1J8
Canada
416-865-1904 (Phone)
416-865-1866 (Fax)

HOME PAGE: http://www.cdhowe.org

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