Auditor general, province debate ‘tough issues’

B.C. Hydro’s deferral accounts holding up financial statement

VICTORIA The B.C. government is late delivering its year-end financial statement because of what the independent auditor general says are “tough issues” the two sides are debating over how the province accounts for its finances.

“I don’t want to say we’re holding things up, because I don’t see it that way,” Auditor General Carol Bellringer said Monday. “Are we having conversations about some tough issues? Yes we are. I can’t tell you what they are until you see the (audit) opinion.”

Bellringer said her office is likely to provide its final audit opinion to the government early this week. Then it will be up to the NDP government when to release the figures publicly. Typically, year-end public accounts are released in July. By law they must be complete by Aug. 31.

Public accounts will cover the financial year ending March 31, 2018, and show the accuracy of the NDP government’s first budget update delivered in September 2017. At the time, Finance Minister Carole James projected a $246-million surplus, but that has subsequently shrunk to $151 million in the most recent quarterly update.

One area of contention is the financial picture at B.C. Hydro, the government-owned Crown power corporation.

Bellringer expressed reservations about Hydro’s use of deferral accounts in last year’s 2016-17 public accounts, qualifying her audit by calling them an “inappropriate use of rate-regulated accounting.”

Concerns appear to have spilled over into the 2017-18 fiscal year as well.

“I will single out the Hydro one because last year was the first time we put a qualification in,” Bellringer said. “It’s a highly technical and complex area. Is that contributing this year? Partly. I don’t think anyone would argue otherwise.”

Hydro can push off certain expenses into future years using deferral accounts, a practice previous auditor general John Doyle said allows the company to look like it’s recording profit on its balance sheet where none actually exists.

The previous Liberal government exploited the technique so that Hydro appeared profitable enough to provide annual financial dividends to the provincial budget. The deferral accounts now total more than $5 billion.

Debate over Hydro’s finances comes as Bellringer prepares to take over as B.C. Hydro’s official auditor in 2019.

Her independent office will replace a private company contracted by Hydro. The move is, in part, over concerns Bellringer has about Hydro’s deferral accounts. “We would like to be closer to what’s going on at Hydro,” she told a committee of MLAs last year.

Another likely area of debate is the Transportation Investment Corporation, responsible for the Port Mann Bridge and the nowcancelled George Massey Tunnel replacement project.

The previous Liberal government considered TIC self-supporting because its projects were financed by current and future tolls. That let government keep $3.4 billion in Port Mann debt off the provincial books, allowing government to borrow more money. However, successive auditors general have argued TIC is actually taxpayer-supported debt.

The situation will be further complicated by Premier John Horgan’s move in 2017 to eliminate tolls on the Port Mann, which forced the government to absorb the debt and could impact the audit of the fiscal year.