This post is probably a week late, but on September 30th, the provincial government released their public accounts figures which show that the government missed their deficit target by almost $100 million from the initial budget and almost $30 million from the third quarter forecast.
Here’s a link to the Winnipeg Sun’s story:
And here is a link to the government’s news release if some think the Sun is too biased:
Now, I’m not going to get into the numbers, and how being off by $100 million on budget predictions seems to be standard practice for this government. Instead, I take issue with something I find much more disturbing. Here’s the exact paragraph from the government news release:
Minister Dewar noted that a portion of the net loss is due to more than $100 million of revenue from the federal government owed to the province as a result of severe summer flooding in 2014 that could not be recorded due to a moratorium on federal funding announcements because of the Oct. 19 election. This revenue had been anticipated in the 2014-15 third Quarterly Financial Report.
So lets look at a few things here:
- Government works on an accrual basis, so never mind the fact that the election call was well into the 2015-2016 fiscal year, it really doesn’t matter when the actual money was received – as long as a receivable exists, it can be counted as revenue.
- The suggestion is that the revenue was not able to be recorded as the election call of August 2nd put a stop to funding announcements. That statement is troubling for two reasons:
- The year-end audit was still ongoing more than 120 days after then end of the fiscal year.
- A funding announcement and confirmation of funding are two entirely different things. As this government knows well, funds often get spent well before the funding announcement is made.
- I expect the government has some sort of assistance program in place with the provinces for floods and emergencies such as this. In that case there would be some sort of application process in place to obtain this support. How else would you be able to record a receivable in Q3 (that’s end of December 2014 at the latest) and know how much to record? (more on this later)
- Even with an election call, payments under federal programs don’t stop. Once funding has been approved, it can still be paid out under a federal program even if there is an election called – money doesn’t stop flowing.
So, what’s the conclusion?
Is it correct to blame an election?
Well, an election may have something to do with it – but only if you look at it from the perspective of the provincial government gambling and losing.
The Government had recorded $100 million of disaster assistance in December 2014. During the audit, this amount was removed by the Auditor General . Why?
Because the Auditor General wasn’t convinced of the collectability of the receivable. Either they couldn’t verify that the province would ever get this money, or they couldn’t verify the amount the province recorded.
In the 3rd quarter of the 2014-2015 fiscal year the provincial government recorded $100 million of assistance, and by the time the AG was examining the books (7-10 months later depending on when the revenue was recorded), there wasn’t enough support for this figure for the Auditor General to allow the provincial government to keep it on the books at March 31, 2015. As long as it was verifiable when the AG confirmed it, it would have been kept on the books. So if the AG was doing their examination 1st week of August and the gov’t got word at that point the claim was valid, the $100M would stay on the March 31st financials.
7-10 months after the revenue was booked, the federal government had not approved this revenue for payment.
Which begs a further question – when was the claim submitted? Or had it even been submitted?
It doesn’t normally take 7-10 months to get a payment approval from the federal government if the costs are eligible under the program.
So where did the $100 million come from? Was there some sort of calculation involved to arrive at this number in the 3rd quarter of the 2014-2015 fiscal year? If so, then why had the provincial government not received notice that the funding request had been approved by the federal government almost 10 months later?
Or, was the $100 million just a plug to make the third quarter forecast look better than it actually was? And what’s the real number?