Auditor general slams changes to Manitoba government's accounting practices

Manitoba's auditor general says he has "significant concerns" with the government's recentfinancial statements and is worried it is only the beginning as the Pallistergovernment looks to"redefine" how the province's books are kept.

The release of the government's annual public accounts on Friday drew heavy criticism from Norm Ricard, who flagged what he described as two departures fromnational accounting standards.

The removal of theWorkers Compensation Board from the government'saccounting books and a surprise transfer of $265 million into a trust both raised the ire of Manitoba's chief accountant.

"It is, in our view, a very serious matter," Ricard said.

Finance Minister Scott Fielding described the transfers as part of a goal to reduce the "volatility" in its summary deficit.

Ricard sees it differently.

Auditor general worried about what is next

Ricard says he is concerned because the government appears to be skirting standard Canadian accounting practices as a means to achieve this goal of reducing volatility.

"We don't know what is next," he said.

"I don't know what is coming down the road. They (the government) aren't sharing everything. All I know is they are very upfront about their goal what that means exactlyI don't know. The first two things they ruled out, I didn't like."

The public accounts also revealed the summary deficit for 2017-18 is $695 million $145 million less than forecast in the 2017 budget.

Within the 127-page document was the report from Ricard, who is responsible for offering an independent audit of the financial statements.

For the first time since 2007, Ricard offered a qualified opinion of the statement meaning there are "significant concerns" about the government's compliance with generally accepted accounting principles.

"Qualified opinions are something an auditor will only issue if it is significant and when it is absolutely necessary," Ricard said.

"It represents a significant departure from Canadian public sector accounting standards."

'Accurately portray the state of Manitoba's finances'

When asked to comment about Ricard'sstatements, a spokesperson for the finance minister said they "differ in opinion with the auditor general about the nature of these changes."

"The province has determined these changes are necessary measures to represent Manitoba's finances in a more accurate way. We feel strongly that we have taken the right approach to better reflect, and accurately portray, the state of Manitoba's finances," said David vonMeyenfeldtin a prepared statement.

He did not rule out removing more government entities from its summary budget in the future.

"The province has commenced a multi-year initiative to improve the transparency of its budgeting and financial reporting across government, particularly reporting that takes place outside of core government departments." he said.

'This isn't our money': finance minister on WCB

The first flag Ricard raised is the decision to remove the WCB, which posted an $82-million surplus, from the summary budget.

The government argues itadds transparency to their accounts because it does not control the activities of the WCB, which is considered a self-sustaining government business enterprise, similar to Manitoba Hydro.

"That isn't our money," said Fielding about the WCB. "For far too long, the government has been taking credit for that."

Fielding said Manitoba is one of only two provinces that includes its provincial workers' insurance agency as part of its summary accounts.

Ricard argues that is not how a government determines what is a reporting entity instead government must look at the WCB's act.

"But you can't say because Ontario or Quebec or B.C. don't consolidate their workers compensation board we shouldn't either. That is not how you do it," he said.

He cited several reasons, including that the board isappointed by the government, the government can disallow any regulations the WCB creates and the board helps pay for government programs.

Removing the WCB hurt the government's bottom line, adding a further $347 million to the deficit.

"You can argue, 'That's interesting, it's going in the direction where they wanted it to go,'" Ricard said. "We're in the business of ensuring that ... government results are accurately recorded whatever they are."

'Unauthorized' government transfer

The public accounts also revealed what Ricard described as an "unauthorized" government transfer of $265 million from the Manitoba Agricultural Services Corporation (MASC) insurance reserve fund to trusts.

To Ricard's surprise, the government revealed this plan two weeks ago. MASC is a Crown corporation that provides agricultural insurance-based programs and lends money to farmers.

"This is a new one for us, we have not seen this before," Ricard said about the last-minute transfer.

He said they signed the agreements in September, but wrote in that they were effective February 2018.

"I'm sorry, that didn't exist in March, April or May. You can't turn the clock back," he said. "We're not buying their argument."

'Moving in the right direction'

The summary deficit, which includes Crown corporations, schools and health authorities, was expected to be $840 million by the end of 2017-18.

Finance Minister Scott Fielding touted the new figures as a sign "we're fixing the finances and moving in the right direction."

"Year after year, the previous government exceeded its deficit projections with reckless overspending, putting the province further in debt. Since forming government over two years ago, we have implemented better budgetary practices and are putting Manitoba back on a path to sustainability," Fielding said in a news release.

However, the release also says public debt charges reached $952 million and are expected to climb to more than $1 billion in the coming year.

The government spent less in the health and education departments than budgeted.

Health spending came in $200 million under budget "due to lower volumes of physician services delivered, fewer capital projects completed and efficiencies derived in the health system," the document says.

Fielding deferred to Manitoba's health minister on the specifics, but attributed the decrease in spending to delays in the opening of the Women's Hospital at Health Sciences Centre and other capital health projects.

"We've achieved a modest 2.9 per cent under-expenditure last year by making good investments while getting better value for money. It is worth noting our government will be investing $700 million more in health care in 2018/19 than the NDP ever did," said Health Minister Cameron Friesen, in a prepared statement.