2015 City of Windsor budget. (Photo by Jason Viau)2015 City of Windsor budget. (Photo by Jason Viau)

Report gives Windsor and London "F" for financial transparency

A new report by the C.D. Howe Institute on financial transparency gives failing grades to three of the cities they investigated. It gave Windsor, London, and Hamilton an "F."

The authors of "The Municipal Money Mystery: Fiscal Accountability in Canada's Cities, 2023," tried to put themselves in the position of a non-expert trying to decipher their community's budgets and financial statements.

C.D. Howe Institute's CEO William Robson and research officer Nicholas Dahir sifted through the 2022 budgets and financial statements of 23 Canadian cities and graded them on timeliness, transparency, and usefulness.

Richmond, B.C. and Quebec City received the highest marks, "A."

"Although this report highlights some concerns with municipalities' year-end audited financial statements, notably timeliness, the clarity and accessibility of these statements are generally good," read the report. "The budgets presented by municipalities around the beginning of their fiscal years, however, are generally not good."

The report said many exaggerate the cost of capital projects, understate the size of city operations, and omit key activities.

"Simple questions -- such as how much the government plans to spend, how plans compare with current activities, and the implications of plans for future capacity to deliver services -- are impossible for non-experts to answer," the report asserted.

Windsor received a low grade for approving its 2022 budget in March. Numbers didn't follow Public Sector Accounting Standards, variances were unexplained, and the external auditor didn't sign financial statements until September. Only the operating budget contained comparisons of projections from the previous year.

The report said London's budget and financial statements were also not timely. The city approved its budget in February, and the external auditor didn't sign the financial statement until August. Reconciliation with public sector accounting standards was incomplete, and again, only the operating budget included comparisons with the previous year's projections.

"Confusing budgets undermine engagement," wrote the report's authors. "Why would citizens pay attention to municipal finances, make representations to their councillors, or attend public meetings if they do not understand the numbers or think budgets are misleading?"

It suggests all municipalities should present budgets consistent with year-end financial statements and make it easy to find headline numbers.

"No user should have to search through dozens of pages in a document or slide deck wondering where the headline numbers for consolidated revenue, expense and surplus or deficit are," said the report. "Many municipal budgets do not."

It also recommended municipalities approve their budgets before the start of the fiscal year and publish financial statements shortly after the year ends. PSAS-consistent accounting with consolidated figures would provide the full picture of the city's activities.

The report used 12 criteria to grade cities, seven related to the budget document and five on the year-end financial statement. Those included when councillors approved the budget, if headline numbers were easy to find, comparisons to previous year projections, and when the external auditor signed financial statements.

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