Our distinct society has distinct accounting methods

Head beancounter can't even tell us how big Quebec's debt is

17. Actualité archives 2007

Is this any way to run a nation? The Quebec government has been cooking its books so much that the province's financial watchdog can't even tell how big the total debt really is.
Even as successive Parti Quebecois and Liberal finance ministers presented one "balanced" budget after another in the seven years since victory was declared in Lucien Bouchard's war on the deficit, the debt has mysteriously continued to rise.
This is supposed to be the year that Quebec starts tackling the debt, the largest per capita in North America, with a first annual payment of $74 million from the new Generations Fund, an investment fund to finance debt reduction. But that will hardly dent the nearly $3 billion by which the debt is projected to increase.
And that's only as much as the government is admitting. Auditor-general Renaud Lachance is certain of one thing, his spokesperson told me yesterday: The debt is more than the already huge $118 billion reported in the annual budget plan tabled in the National Assembly last March.
But, said Raymonde Cote-Tremblay, "we can't even estimate how much it might be."
That's because, as the auditor-general reported Tuesday, while governments now are required to balance the annual budget, they've been concealing actual annual deficits of as much as $1.4 billion.
In total, Lachance said that as of last year, the governments had hidden deficits totalling at least $5.3 billion. An additional sum of $900 million in past expenditures is to be accounted for in future budgets.
At his news conference at the Assembly after presenting a special report on the public accounts for last year, Lachance was asked whether the governments have been lying.
He wouldn't say yes, but he wouldn't say no, either. "I invite (the government) to have more rigour, clearly," he said.
And he used the word "questionable" to describe the government's accounting methods.
Revenue of $112 million from federal transfers was credited twice. Unlike Ottawa and all the other provinces except Newfoundland and Manitoba, Quebec did not apply the conventions of the Canadian Institute of Chartered Accountants in its public accounts.
And Quebec was the only province whose government didn't assume responsibility for deficits in the education and health and social-service networks under its control. The Distinct Society even has distinct government accounting.
Since Quebec did not apply the principles of the accountants' institute, Lachance implied that its financial statements are not "objective" and can't be compared to those of other provinces.
Lachance said that in the private sector, companies conform to the principles of the institute because of their "independence and rigour." So Quebec is among the last jurisdictions in Canada to use accounting methods that "are sometimes far" from those of the institute.
Auditors-general have delivered similar complaints in the past. But this time, Lachance went farther, issuing a strongly worded statement saying the government's report of a surplus of $192 million for last year is "not credible."
The phrase "Enron-style accounting" came to mind, as did an image of a perp walk of corporate executives in handcuffs. But Lachance had to concede that while the governments have been violating the spirit of the law requiring them to balance the budget, they've obeyed its letter.
Anyway, while the governments have been deceiving the public, the people whose opinion matters most to them seem satisfied with what they've been reading in the province's books.
Those are the gods of the bond-rating agencies who determine the rate of interest at which the government borrows. And as Finance Minister Michel Audet recalled in his financial statement the day Lachance presented his report, last June agencies in New York and Toronto raised Quebec's credit rating to its highest level in two decades.
Apparently they liked what they read in Audet's March budget, even if the province's financial watchdog didn't.

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