Nova Scotias Books Accurate and Fair

first_imgNova Scotia’s budget and other financial documents present anaccurate and fair picture of the province’s financial position,deputy finance minister Howard Windsor said today, Dec. 3. Mr. Windsor and senior officials of the provincial finance department appeared before the legislature’s public accountscommittee to review various accounting changes undertaken overthe past few years. Those changes, according to the provincial auditor general, have “allowed Nova Scotia to move from the bottom of the pack (among) provincial governments, to that of a leader,” in terms offinancial reporting. Despite that high praise, the auditor general issued a reportrecently that took issue with some of the province’s recentaccounting decisions. At the public accounts committee meeting, the finance departmentofficials answered each of those concerns. They relate to theimpact of census changes on provincial revenues and thedisclosure of the impact of retirement health benefits andpension asset values. The province did not alter its revenue projections in the 2003-04 budget to account for an anticipated census adjustment, assuggested by the auditor general, for a number of reasons. In preparing the budget, the department had raw data from the2001 census but experience suggested raw data was unreliable.There were significant changes from the raw data to the finalcensus numbers following the 1996 census. Census numbers impactprimarily on equalization, and there are more than 200 variablesin the equalization calculation used by Ottawa. To isolate onevariable — census — and change revenue projections based onthat one variable, would lead to “purely speculative” revenuechanges, the deputy minister said. Such speculation would not meet the standard of certaintyestablished by the auditor general himself for the province’srevenue assumptions. “As it turns out, had we pulled that raw data into our revenue projections at budget time, as the auditor general is nowsuggesting, it would have pretty much ruined the province’sfinances for this year,” said Mr. Windsor. The department ran its revenue projection models using the rawdata, as suggested by the auditor general. The result was a $73million over-estimate of revenues. Had the province acted uponthat faulty information in last spring’s budget, the governmentwould now be looking at either a budget deficit of $73 million,or additional spending cuts of the same magnitude. The auditor general’s report was also critical of the provincefor not fully disclosing changes in the way it accounts forpension assets — so-called smoothing — despite the fact that atthe time of the budget a bulletin was issued drawing attention tothe change. Noting that the change is in keeping with Generally AcceptedAccounting Principles (GAAP), the deputy minister conceded thatmore could have been done to highlight it. “There is a flood of information released with the budget, and wedo try to walk the line between full disclosure and the absoluteboredom threshold of Nova Scotians.” The third issue, also a question of disclosure, or moreaccurately the timing of disclosure, concerns the cost of healthbenefits for retired public servants. Provincial Controller Kevin Malloy noted that the liability forthose benefits has existed for about 30 years, and thedisagreement with the auditor general was over when to “book” theliability as now required by GAAP. He said that in October 2002, the former deputy minister of finance wrote to the auditor general explaining the province’sintention to make that accounting change in the 2004-05 budget.The department did not become aware that the timing of theaccounting change was a serious issue for the auditor generaluntil June of this year. Mr. Malloy said when the auditor general made the case thatretirement health benefits be included in the 2002-03 financialstatements, the government agreed. The 2002-03 statements werereleased last month and included the change, which increased thenet direct debt by $493 million. Finance Minister Peter Christie said his focus is dealing withtoday’s budgetary challenges and preparing a budget for nextspring, rather than reviewing previous budgets.last_img

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