The City of Richmond has once again been recognized for the clarity, completeness and timeliness of its fiscal accountability.
Tied with Quebec City at the top of the class, the city's 2023 budgets and 2022 financial statements were given an A grade in C.D. Howe Institute's latest report on municipal fiscal accountability.
The cities were found to have approved their budgets and financial statements "promptly" with budgets that presented key numbers up front, as well as financial statements that linked back to budgets and addressed differences between projections and results.
According to the report, Richmond's budgeted spending in 2022 was $520 million, while its actual spending or expenses during the year was $500 million. It had an annual surplus of $140 million in 2022, adding up to an accumulated surplus of $3.63 billion.
The city's entire budget was also found to be consistent with public sector accounting standards.
Vancouver came close to the top at A-, tied with Markham, Ont., and Saskatoon, Sask., while Hamilton, Ont., London, Ont., and Windsor, Ont., came last with F grades.
The City of Richmond has received the top grade for the past two years. Last year, it was awarded the Canadian Award for Financial Reporting for its 2021 annual report, while its annual report highlights won an award for outstanding achievement in popular financial reporting for the 13th year.
Importance of fiscal transparency
While the financial statements of most municipalities performed well according to the report, the problem lies with budgets presented at the beginning of the fiscal year.
According to authors of the report William B.P. Robson and Nicholas Dahir, municipal budgets and financial statements still need further improvement as most continue to present budgets that "do not match their financial statements."
One issue highlighted in the report is budgets with issues such as understating the size of city operations, omitting key activities and exaggerating costs of capital projects.
Consequences for such shortcomings, said the report, include big price tags that either discourage councillors from investing in infrastructure or raising too much money upfront to finance certain projects.
"Confusing budgets undermine engagement. 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 if they think budgets are misleading?" reads the report.
Robson and Dahir found most budgets were inconsistent with public sector accounting standards, meaning it's difficult to compare the city's projections and past results, and many municipalities were late with their budgets to the point where they would be finalized after money had already been spent before getting council approval.
According to the report, financial documents should at the minimum let readers who are "motivated and numerate, but not an expert in accounting" identify revenues, expenses, surpluses and deficits that can be compared to the government's accumulated surplus and capacity to deliver future services.
The authors warned municipalities may experience financial stresses in the years ahead due to a slowing economy, housing and infrastructure demands and constrained finances of senior governments.
"Good understanding of, and intelligent debate about, municipal finances can only help," reads the report.
For more information, read the full report here.
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