Supporting Accountability and Transparency for Local Government

Preamble

As civic leaders, and in their role as stewards of our community, municipally elected representatives arguably have the strongest influence over our day-to-day lives.  Municipal politicians play a significant role in ensuring BC has a positive business environment by overseeing operational and capital budgets, setting land use policies and providing the infrastructure needed to ensure a healthy and vibrant economy.  It is important then that provincial legislation and reporting requirements support them in this endeavor.

Provincially, municipal budgets and spending has been increasing at an unsustainable rate,(1) highlighting the need to look at the big picture where regional budgets and priorities are concerned, and to develop better ways for elected officials within a region to make their decisions in the context of all the other demands on local taxpayers.  One example is the timelines that exist for each municipality, regional district, local school board and other utilities/services to present their budgets.  Under current practices, elected officials often don’t have information on what others are doing with their budgets until after they are required to make their own budgetary decisions.  Mayors and Councillors are then left to anecdotally piece together a fuller understanding of the demands on the public purse while they sit around committee tables, providing a less than perfect picture for them when trying to ensure that communities remain affordable and financially sustainable.  A requirement should be in place for all of these taxing bodies to coordinate their reporting and budgeting so that elected officials and the public can better understand the big picture, and fully understand all the demands being placed on them. This would be a significant step in the right direction.

In 1966, the BC government established the “regional district” concept of local government in hopes of dealing with problems that transcended traditional municipal boundaries.  These regional governments operate throughout the province as a local form of government.  Today, there are 154 municipalities in BC, plus 27 regional districts.  The purpose of regional districts is three-fold: they are regional governments that deliver regional services, they are inter-municipal and provide a political and administrative framework for the delivery of services on a partnership basis, and they can offer local government services for unincorporated areas.  While there are a few checks and balances that can help manage local infrastructure priorities, as regions in province continue to grow this will continue to present new challenges, as many of the biggest infrastructure projects are now being undertaken at the regional district level.(2)  Provincial legislation governing this new paradigm should be reviewed and must evolve to ensure that measures that support accountability to the taxpayer are not being diluted as a result of these new realities.

One such example is the two different pieces of legislation that govern the regional districts versus local municipalities.  As a by-product of provincial political history, many of the requirements put on local municipalities do not apply to regional districts, resulting in distinct differences where accountability to local taxpayers is concerned.  Under the provincial Community Charter municipalities are restricted in the amount of debt they can take on and are required to seek voter approval for amounts exceeding a certain limit.

Regional Districts however, play by a different set of rules.  Governed by the Local Government Act, they don’t have the same legislated limits on the amount of debt that can be accumulated and aren’t required to directly ask for voter approval when making large capital decisions.  From an accountability and transparency perspective, strengthening these requirements would be a good step towards ensuring that taxpayer interests and voices remain front and center as regional districts continue to play a larger role in our economic prosperity and financial sustainability.

Starting in 2009, new accounting standards set by the Public Service Accounting Board, a national standards governing body, requiring municipalities to adopt “full accrual“ accounting standards when reporting their annual financial statements, standards similar to those used in the private sector.  The changes to these guidelines(3) increased accountability and helped provide a more robust and relevant depiction of municipal finances and in particular, their future liabilities.  A requirement of the Local Government Act and Community Charter, these annual reports and accompanying local budgets are important tools to ensure that municipalities and elected representatives are accountable to the taxpayer.

Unfortunately given the recent change, at present there is no requirement in the legislation that the accounting standard for each be the same.  Municipalities in the province are able to present budgets under a “cash accounting” standard and then later present their annual finance reports in the new full accrual standard. This contributes to significant difficulty for taxpayers to make reasonable and accurate comparisons.   BC municipalities are not alone in this circumstance, a recent CD Howe report found that nationally, 87% of municipalities surveyed did not use the same accounting standard.(4)  The report highlighted how even neighboring municipalities such as Vancouver and Surrey can employ different reporting where budgets and financial statements are concerned, with Vancouver not using the same treatment, while Surrey did meet this standard.  Amending the Local Government Act and Community Charter to ensure that accounting treatments match, would be an important step in ensuring that elected officials and the broader community can reasonably assess, compare, and discuss their local municipal finances.

THE CHAMBER RECOMMENDS:

That the Provincial Government:

  1. develop a Municipal Finance Administration Act to standardize reporting requirements and dates;

  2. amend Local Government Act to include provisions for elector assent similar to that of the Community Charter;

  3. amend Local Government Act to include similar borrowing ratios to that of the Community Charter; and

  4. amend the Community Charter and Local Government Act to ensure budgetary reporting standards match financial reporting standards.

Footnotes

(1) BC Municipal Spending - Statistics Canada: Table 385-0003 Local government expenditures for fiscal year ending closest to December 31, annual (dollars x 1,000)(3,4,6), BC GDP - Statistics Canada: Catalogue no. 13-213-PIB.

(2) Province of British Columbia, Major Projects Inventory, September 2011.

(3) Public Sector Accounting Board, Handbook sections PS 4200 to 4270.

(4) Holding Canada’s Cities to Account: An Assessment of Municipal Fiscal Management, CD Howe, November 2011.