Parts of B.C. financial statements 'not accurate,' auditor general says

Orange shirts, shoes, flowers and messages are on display on the steps outside the legislature in Victoria, B.C., on Saturday, June 12, 2021. THE CANADIAN PRESS/Chad Hipolito

The B.C. government's summary financial statements for the 2021-22 fiscal year contain inaccuracies that "might mislead" the public if not corrected, according to the province's auditor general.

Michael Pickup released a qualified audit opinion Wednesday flagging what he described as three departures from "generally accepted accounting principles" in the documents.

"In my opinion, the government's method of accounting lacks transparency," Pickup said in a statement.

One of the issues Pickup flagged was that B.C. recorded payments from other governments and non-government sources as deferred revenue, or liabilities, rather than revenue, which the auditor general said was contrary to Canadian Public Sector Accounting Standards.

"If the financial statements had followed this standard, the surplus would have been $6.48 billion higher, while liabilities would have been lowered by the same amount," the auditor general's office said in a news release.

The Ministry of Finance noted that same point has been "included in the (auditor general's) opinion since 2011-12," and argued the province's accounting actually improves accountability.

"The deferral of restricted grants means that if the federal government provided contributions to build a school, for example, the province would build the school and use it as a school. Accounting requires us to amortize, or gradually write off, the value of that school over 40 years, reporting an expense in each of those 40 years the school is used," the ministry said in an email.

"We recognize the federal contributions as revenue on the same basis. We are not alone in this treatment of restricted grants. Other provinces continue to defer restricted contributions because it better serves accountability to the public.".

Pickup also said the province's disclosures of future expenditures was incomplete, and that the government left out "many commitments" for under $50 million. The result was an understatement of $708 million worth of contractual obligation in 2023 and another $315 million in 2024, according to the auditor general.

The third and final issue involved the government's sharing of seven per cent of the B.C. Lottery Corporation's net revenue with the B.C. First Nations Gaming Revenue Sharing Limited Partnership, which Pickup said was not accounted for properly in the financial documents.

"The net income from BCLC that is recorded on government's statement should include all gaming revenues and the transfer of (seven per cent) of this net income should be recorded as an expense in government's statements. Neither the income nor the expense have been reflected in the statements," Pickup's office said in the release.

That resulted in a $91 million "understatement of revenues and expenses on the government's current statement of operations."

The Ministry of Finance defended the province's accounting on that point as well, saying it does not include the portion going to First Nations as revenue because "legally, it belongs to the Nations."

The qualified opinion was delivered one day after Finance Minister Selina Robinson announced a surprise $1.3 billion budget surplus for the fiscal year that ended back in March.

The Ministry of Finance told CTV News that Robinson was not available for an interview to respond to the auditor general’s concerns on Wednesday, but that the ministry would be providing a statement. This article will be updated when that statement is received.