Fentie ranks high on ‘Pinocchio index’

A conservative think tank has ranked the Yukon's finances the worst managed in the country mere weeks after Premier Dennis Fentie tabled a $2.9 million surplus budget. The C.

A conservative think tank has ranked the Yukon’s finances the worst managed in the country mere weeks after Premier Dennis Fentie tabled a $2.9 million surplus budget.

The C.D. Howe Institute’s fiscal accountability report, also known as the “Pinocchio index,” slammed the Yukon for a decade of wonky budgets that failed to predict actual spending and revenue.

“Budget figures in the Yukon are simply not comparable with their year-end numbers,” said Colin Busby, a policy analyst and the report’s coauthor.

“I couldn’t even tell you, exactly, what one document includes and what one doesn’t,” he said. “For me, it’s not entirely clear at first glance.”

Compared to all territorial, provincial and federal governments, the Yukon is dead last when it comes to aligning promises in the budget with actual spending.

The territory’s use of multiple accounting techniques and confusing mid-fiscal year changes were largely to blame for the failing grade.

The report, released last Friday, doesn’t even begin to address the risky decision of shifting over $217 million in spending from the government’s main estimates to its Crown corporations.

But it does heavily criticize deviations between budget numbers and actual public accounts, something Fentie indulged in again on March 19 when he tabled the $1 billion budget for the 2010/11 year in the legislature.

“It appears as if different accounting principles are being used in one accounting document compared to the other,” said Busby.

When Fentie presented his budget, the government’s numbers are not consolidated with all its subsidiaries. That means he can offer a surplus for the departments, but not for the government as a whole, which would includes the Yukon’s Crown corporations.

“The government itself likely understands exactly what’s going on, but anyone outside likely wouldn’t understand,” said Busby.

The second casualty is the reliability of the department’s spending numbers themselves. The C.D. Howe Institute had trouble lining up the budget’s items with end-of-year statements, he said.

“If you worked in government and wanted to look at last year’s planning and wanted to see how well you did in meeting them, you’re going to have a real hard time and it’s a really simple question,” he said.

The end-of-year statements numbers themselves are consolidated, but that’s cold comfort for anyone wanting to see where the public purse is headed.

“Not only would busy legislators have a hard time doing (finding out real spending) – and these are people who have access to research staff and people who can answer these questions – the average individual voter would be even more confused,” said Busby.

If a government is spending irresponsibly, it can remain unaccountable by referencing the budget at the podium rather than any real numbers.

“It’s a problem for anyone who wants to scrutinize these figures,” he said.

The institute’s point is even more salient when you add up all the extra spending the government has failed to add to the budget, or shifted off to it’s Crown corporations.

In his March budget, Fentie pushed the budget’s wonky accounting to new heights.

He predicted a $2.9 million surplus, but the document doesn’t include $2 million for repairs at the Thompson Health Centre, which the Health Department hasn’t budgeted.

Nor does it include a collective agreement negotiated with the Yukon Employees’ Union, reported to be a two per cent increase in 2010, which could cost the government an extra $7.2 million if this year’s payroll estimates are used.

Fentie’s surplus also excludes a $100 million bond being secured by the Yukon Development Corporation and $117 million being spent on new hospitals in Dawson City and Watson Lake, the expansion of the Whitehorse General Hospital and its new residence.

The government also only has $175,000 in its fire contingency fund after drawing it down $7 million last year.

All these items undermine Fentie’s assertion there’s a surplus.

“I can’t think of any good reason why the government should continue to report in a different manner in it’s budget document vis-a-vis it’s public account documents,” said Busby.

“To me, it’s obfuscation.”

The institute also gave the Yukon a poor grade for failing to explain changes in spending in mid-year. Ontario and Canada set the standard for doing it well, said Busby.

“When you open up the public account documents, right away, they say ‘This is what we planned, this is what we spent, this is how big the deviation was and this is why it happened.’”

The study, which runs from 1999/2000 to 2008/2009, is largely a report card on Fentie’s bean- counting abilities. He’s been finance minister since 2002.

Busby and his coauthor, C.D. Howe president William Robson, excuse deviations in the 2008/09 fiscal year because of the global economic recession.

But the Yukon’s worst years in terms of matching planning with reality are much before that, with the mid-decade displaying some pretty inconsistent figures.

For example, in the 2003/04 year, the Yukon’s actual spending went 15 per cent above the predicted amount.

Over the 10-year period, the average difference between announced and actual spending was 6.9 per cent, which earned the Yukon last place among all governments. Budget overruns over 10 years totaled $500 million.

The Yukon fared a little better when it came to revenue prediction, ending up in sixth place.

During Monday’s question period, Fentie defended his budgeting by suggesting that “this type of budgeting for the Yukon has gone on for decades.”

Fentie explained that if you tied in the Crown corporations’ budgets with the government’s unconsolidated budget, then the prediction-to-reality ratio would be much lower and C.D. Howe would give the Yukon a better grade.

That’s debatable when the institute believes Fentie should just drop unconsolidated accounting altogether because it doesn’t present true accountability.

Fentie also defended the Yukon and Alberta for having no debt. Once again, he neglected to mention heavy borrowing by Crown Corporations. But he might not want to pull from the Alberta example too much. The province ranked last among provinces because of gaps between predicted and actual spending.

And Alberta has its share of public purse woes at the moment.

Ed Stelmach’s government is taking heat for promising to cut health costs, fiddling with oil royalty finances and sinking the province into a deficit.

Fentie refused to comment for this story.

The New Democratic Party would like to put together a standing committee on Crown corporations to meld their finances with the government’s main estimates, said leader Elizabeth Hanson.

“That’s taxpayers’ money and I’d like to see the whole picture,” she said.

The committee could also demand a look at the accounts more often than once a year, she said.

Currently, the public accounts committee has only met once this year and only examines departmental accounts.

Hanson fell short of demanding both the budget and end-of-year public accounts be done with similar accounting techniques.

The blame for the schizophrenic use of different accounting techniques falls on the shoulders of both bureaucrats and cabinet, said Busby.

“There could be some bureaucratic initiative to take care of this issue, but at the end of the day, voters need to hold legislators to do their job and legislators need to hold government to do theirs.”

“And when there are deviations like this, who’s accountable?”

Contact James Munson at

jamesm@yukon-news.com

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