December 10, 2022

AG report highlights government’s inaccurate financial reporting, rising disaster costs and COVID-19 benefit recoveries

A Auditor General Michael Pickup’s new report to the Legislative Assembly flags key areas of interest and concern following his office’s audit of the province’s financial statements for the 2021-22 fiscal year.

Summary financial statements consolidating the financial results of more than 160 public entities (government departments, crown agencies, health authorities, universities, colleges and school districts) were released by the Minister of Finance in August.

It included a qualified report from an independent auditor based on three material misstatements that did not comply with public sector accounting standards. Except for such misstatements, the summary financial statements are presented fairly in all material respects. The audit revealed misleading errors or omissions, including:

* The province’s accounting for funds from other governments and externally restricted funds received from non-government sources.

* Incomplete disclosures of future contractual obligations.

* His accounting for a revenue sharing agreement between the BC Lotteries Corporation and BC First Nations.

“As an independent officer of the legislature, it is my role to provide accurate, objective information and independent assurance to help the legislature hold government to account,” Pickup said Tuesday. “I am the fourth successive Auditor General to issue a qualified opinion on British Columbia’s financial statements based on how the province accounts for revenues received from other governments.

“Public sector accounting standards are designed to allow the government to report fairly on its finances, including any volatility that occurs. The BC government is obscuring its financial position by applying an accounting policy designed to smooth profits over long periods,” Pickup said. “Our concern is that this opens up the government’s accounts to possible future manipulation of the financial statements. It also prevents users of the financial statements, such as MPs, from participating in a healthy and informed debate on government finances.

Tuesday’s report provides additional information on financial matters of interest, including:

* Wildfire, flood and landslide costs increase by $5 billion in 2021, more than the previous 19 years combined.

* The government’s ongoing review of payments made under COVID-19 benefit programs had, as of June 30, identified more than $10 million in overpayments that now need to be recovered from ineligible recipients.

* Significant control weaknesses and risks (“Management Letter Points”) have been identified for government entities to improve financial policies and processes.

After reading the report, Members of Parliament and the public may want to ask how the government plans to resolve material misstatements, address the elements of the management letter, and whether it has financial processes and resources in place to effectively manage future weather-related disasters, Pickup said.

Related links:

Report on financial audit work: fiscal year 2021-22:

Report in brief: in brief/ROFAW-RAAG-November2022.pdf