Hey there, time traveller!
This article was published 4/10/2019 (245 days ago), so information in it may no longer be current.
It is unlikely Manitoba Auditor General Norm Ricard will explain exactly why he stunned political observers on Friday and announced he will retire midway through his 10-year term of office.
Was it related to a personal issue, or perhaps some professional challenge? Given the institutional discretion with which auditors general conduct their business, we may never know.
What we do know is that in leaving now, he leaves a major issue of government bookkeeping unresolved.
For two straight years, Ricard has refused to sign off on the province's public accounts, the definitive record of government finances, because Premier Brian Pallister and his Tory government have continued to violate the rules of Public Sector Accounting Principles.
Last week, Ricard demonstrated the gravity of his concern by issuing a rare but not unprecedented special report to the legislature on his decision not to qualify the province's books for a second year. In it, he notes two "material misstatements" in the public accounts.
The misstatements relate to the Tory government's decision to remove both the Workers Compensation Board (WCB) and the Manitoba Agricultural Services Corporation (MASC) from the summary financial statements, the very foundation of the public accounts.
Ricard said that because both entities are legally and administratively within the direct control of government, they must be included in the government's balance sheet. The Pallister government disagrees. The result is that for two years, we have incomplete public accounts.
At first blush, the decision to exclude these two entities seems at odds with Pallister's fiscal goal of balancing the budget. Both entities are flush with assets; in the case of MASC, there is also an enormous operating surplus.
If Pallister had left both entities on the province's books, Ricard believes the premier could have reported a surplus in both the 2018-19 and 2019-20 budgets and lowered net debt. Instead, the Pallister government reported deficits in both years and, by excluding the enormous reserve assets of both entities, net debt is $1 billion higher.
Why would Pallister, a man who values fiscal responsibility more than two uninterrupted weeks in Central America, endure unnecessary deficits and higher debt? Political sources believe Pallister wants to maintain the illusion of deficit so he can use it as context for continued austerity.
In the 2018-19 public accounts, the Tory government came in $215 million under budget in health care and $79 million in education. Without a lingering deficit to justify that austerity, it just looks mean-spirited.
Ricard has another explanation: he believes Pallister is playing the long game, trading a bit of budget pain now for considerably less budgetary volatility down the road.
In his report to the legislature, Ricard notes officials from the finance department told him their accounting strategy was designed "to reduce the volatility of reported results."
Now, reducing volatility on its own is not a nefarious motivation. However, when we're talking about government financial statements, reducing volatility can quickly become code for a political manipulation of the books.
Both the WCB and MASC are insurance schemes that seek to protect workers and farmers. In the former, it's injuries at work; in the latter, it's weather and market-related downturns that threaten the livelihood of producers. Both are primarily self-funded (WCB by workers and employers; MASC by producers with contributions from the federal and provincial governments) and by law, their assets cannot be used by government for any purpose other than helping workers and farmers.
With more than $1 billion in combined assets, it's hard to see where the volatility exists. However, that is just on the asset side; on the operations side, there is more uncertainty.
For example, the same year the province decided to remove the WCB from the books, it announced a $74-million premium rebate to employers. Growth Enterprise and Trade Minister Blaine Pedersen denied that government directed the rebates, but acknowledged he "encouraged" the WCB to use some of its more than $600 million in reserve assets to return money to employers.
The result was that WCB recorded a $52-million operating loss in 2018-19. If WCB had been on the books, that would have increased the province's stated deficit of $163 million to $215 million. And with future rebates always a possibility, the WCB could represent a drag on efforts to balance the summary budget for years to come.
Finance Minister Scott Fielding denied reducing volatility is the primary motivator for removing the WCB and MASC from the books. In an interview, he said government wants to eliminate entities that are self-financing and set up for specific purposes that government cannot change or compromise.
On the WCB, Fielding said the government will amend legislation to make it abundantly clear it is no longer under any government control. For MASC, the government simply disagrees with Ricard's opinion.
"It's not our money," Fielding said. "It's the farmer's money."
It may be, but both the WCB and MASC seem to be largely under government control. We can see that in Minister Pedersen's encouragement for the decision to rebate WCB premiums to employers. And just last week, Agriculture Minister Ralph Eichler issued a news release to announce a new MASC program to help cattle producers.
The WCB and MASC may be gone from the government's books. But as long as the auditor general is on the case, they — and the reasons they were stricken from the balance sheet — will not be forgotten.
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.
Your support has enabled us to provide free access to stories about COVID-19 because we believe everyone deserves trusted and critical information during the pandemic.
Our readership has contributed additional funding to give Free Press online subscriptions to those that can’t afford one in these extraordinary times — giving new readers the opportunity to see beyond the headlines and connect with other stories about their community.
To those who have made donations, thank you.
To those able to give and share our journalism with others, please Pay it Forward.
The Free Press has shared COVID-19 stories free of charge because we believe everyone deserves access to trusted and critical information during the pandemic.
While we stand by this decision, it has undoubtedly affected our bottom line.
After nearly 150 years of reporting on our city, we don’t want to stop any time soon. With your support, we’ll be able to forge ahead with our journalistic mission.
If you believe in an independent, transparent, and democratic press, please consider subscribing today.
We understand that some readers cannot afford a subscription during these difficult times and invite them to apply for a free digital subscription through our Pay it Forward program.