VICTORIA (NEWS1130) – BC’s auditor general says the deficit in this province is much higher than what was reported in July. The 2011/2012 summary financial statements showed $1.84 billion but John Doyle says it’s actually $520 million more.

He’s blaming the bookkeeping saying proper accounting standards have not been followed in many areas including income received.

“The income that government has received which they’ve deferred into another time period improperly, and there’s $279 million worth of income that’s been understated,” explains Doyle.

Doyle say the solution is straight forward, government needs to comply with the standards set by the Public Sector Accounting Board.

“British Columbians deserve easy-to-understand financial reporting, with a clean opinion, from their government,” says Doyle.

The government says it does follow accounting practices used across North America, adding where there is opportunity to improve on the information presented, it will work to do so.


The report released by the auditor general includes eight recommendations, four of them relate to the qualifications in this year’s audit opinion:

What is a qualification?

Qualifications are deviations from Canadian generally accepted accounting principles (GAAP) that might mislead a user of the financial statements. This year’s audit opinion contained four qualifications:

1. The improper consolidation of the Transportation Investment Corporation

Government should have consolidated the TI Corp (the Crown corporation responsible for constructing and managing the new Port Mann Bridge) into the Summary Financial Statements using the full line-by-line consolidation method (rather than the modified equity method) as it does not yet qualify as a government business enterprise.

Had the TI Corp been fully consolidated, the deficit would have been greater by $79 million. This item has been an audit qualification every year since 2008/09.

2. Failure to provide for deep-well credits

Deep-well credits are used to reduce the amount of royalties that gas producers must pay to the Province when they extract gas from a well drilled to a specified depth. From an accounting perspective, deep-well credits are an expense incurred by the government to promote the growth of the oil and gas resource industry. They should, therefore, be recorded as a liability of the Province.  

Had these credits been correctly accounted for, the deficit would have been greater by $702 million.

This item was also a qualification in the 2007/08 through 2009/10 audit opinions. (In 2010/11, the issue still existed but did not warrant any further explanation.)

3. Inappropriate deferral of government transfers revenue

Historically, transfers of funds or other assets from one level of government to another, designated for a particular area of activity or over future periods, were deferred and matched with the related expenditures of the recipient as they occurred. However, as of the mandatory adoption date of April 1, 2012, the new standard is to define income in terms of change in financial position from one period to the next. This provides readers of the financial statements with a better sense of whether the entity’s financial position has improved or deteriorated.

In the fall of 2011, government issued regulation BC Reg. 198/2011, directing government organizations to continue reporting government transfers as they had in the past. As a result, 10 organizations received non-GAAP compliant audit opinions, and this number is expected to increase substantially in fiscal 2012/13.   

In 2011/12, the significance of these errors (specifically in the financial statements of the BC Transportation Financing Authority, of which government was forewarned in last year’s report) are enough that the Auditor General has qualified his opinion on the Summary Financial Statements. Had deferrals been accounted for correctly, the deficit for the year ended would have been less by $279 million.

4. Failure to disclose required government business enterprise financial information

Public sector accounting standards require that condensed supplementary financial information be provided for government business enterprises. Had this information been disclosed, a number of line items (including assets, liabilities, equity and net earnings) in the Public Accounts for self-supported Crown corporations and agencies would have been different. But, the deficit for the year as reported would not have been affected.

As it is, however, assets would have been greater by $1.1 billion and liabilities other than debt would have been greater by $207 million.