Balanced budgets or creative accounting?

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Pontiac Perspective  Peter J. Gauthier


Pontiac Perspective  Peter J. Gauthier

Let’s start with a little story. A few weeks ago, the Finance Minister, the Defence Minister and the Minister of Veterans Affairs decided to visit Pembroke to discuss payments to veterans. Around noon they decided to have a meal at a nearby restaurant; the special was $10, tax included; each minister ordered the special. Their meals were served and the waiter presented three individual bills.
However, the ministers began a more than two hour discussion on reasonable expense claims. As no alcohol was served, no tip was required – restaurant servers were paid enough without burdening tax payers with frivolous extras. Finally, each minister put down a ten dollar bill and asked for separate receipts – they could claim the meal as a necessary expense. The waiter took their money to the cashier and asked for three receipts, which the cashier produced, before noticing the ministers were the last customers in the restaurant; as it was the restaurant’s policy to give a discount to the last customers, the cashier removed three loonies and a toonie and reminded the waiter of the traditional discount. The waiter decided a small tip was warranted so he returned a loonie to each minister and kept a toonie. Now do the math. Each minister actually paid nine dollars for their meal, a total of $27. Add to this the toonie that the waiter kept and the total is $29. So where did the extra $1 go?
No doubt, the reader has spotted the error in this accounting scheme, but the drive for balanced budgets by both federal and provincial governments contains some similar creative accounting. Some past examples: revenues for Employment Insurance and Government Pensions have been transferred to general revenues. When these accounts showed deficits, the government simply raised the contribution amounts. Revenues expected in two years were credited to the next fiscal year. Expenses due during the upcoming fiscal year were postponed. And the simplest – pass the expense down to a lower government (municipal, or for the federal government, to the provincial level).  A close look at ‘balanced’ budgets often reveals creative accounting that would be unacceptable in private practice.
This is not the most serious issue with many balanced budgets. Much of the balancing is done by reducing funds for essential services such as health, education and infrastructure maintenance.  Reductions of this type affect the less fortunate members of our society the greatest, and yet our governments fail to include social costs in their financial plans; their ideologies only consider immediate financial costs. The long-term effects of reduced health care, poorer education and crumbling infrastructure are conveniently put aside in self-praise of a government balanced budget.
No citizen would tolerate waste and misspending in government, but we should demand that serious social deficits be considered when preparing budgets. An honest budget that tackles serious social issues is more valuable than a budget that is balanced by creative accounting and reduction of basic services.