The budgets governments present around the beginning of their fiscal years and the financial statements they publish in their annual reports after their fiscal years have ended are critical tools for legislators and voters to hold them accountable. The transparency of these documents to non-experts has always mattered: they should let readers understand governments’ plans, see how results differed from these plans and assess governments’ future capacity to deliver services. The fiscal stresses of the COVID-19 crisis will make these attributes even more critical in the years ahead. This report assesses the quality of the budgets and annual reports of 31 major Canadian municipalities according to their usefulness for these purposes.The grades we derive in this year’s version of our annual survey range from A to F. At the bottom of the scale are Regina and Saskatoon, whose financial documents fail to meet a minimal standard of transparency, usefulness and timeliness. At the top is Vancouver, whose documents earn an A+ for their clarity, completeness and promptness. Surrey and Quebec City, each with an A, and Markham, Richmond, Vaughan, and Laval each with an A-, also stand out favourably.The financial statements Canadian municipalities publish after year-end are typically well organized. They follow public sector accounting standards (PSAS) and present the key figures where users can easily find and identify them. While some of the municipalities we look at released their results late, and we have reservations about below-the-line adjustments that can cloud understanding of the municipality’s fiscal capacity, we generally award high scores for these municipalities’ financial statements.By contrast, many municipalities’ budgets present readers with challenges. Most do not present PSAS-consistent figures that are easy to find, and many do not present them at all. Most of the 31 present separate operating and capital budgets, with the latter prepared on a cash basis. Even experts will struggle to reconcile such budgets with past results or to use them to predict what the municipality will report at year-end. Many budgets also separate tax- and rate-supported activities, making totals for revenues and expenses even harder to calculate. Worse, municipal councillors often voted on budgets after the fiscal year started and money was already being spent.These challenges matter. Opaque budgets have real-world consequences, ranging from disengagement by people who do not understand them and lack of awareness of the generally robust financial condition of Canadian cities, to funds collected up front for capital projects that may not occur for years and neglect of infrastructure maintenance.Our core recommendation is that municipal governments should present budgets using the same accounting standards and format that they use in their year-end financial statements. One key implication would be that municipal budgets would use accrual accounting with respect to capital, recording revenues and expenses as assets deliver their services. Provincial governments that impede the preparation of PSAS-consistent municipal budgets – for example, by mandating separate operating and capital budgets – should stop doing so.A second implication of using PSAS-consistent accounting in all documents is that municipal budgets, like municipal financial statements, would show city-wide consolidated gross revenue and spending figures that represent the city’s full claim on its citizens’ resources and the full scope of its activities. Along with more transparently presented numbers and more timely information, these changes would raise the fiscal accountability of Canada’s municipalities to a level more commensurate with their importance in Canadians’ lives.Note to Readers: This is a revised version of the Commentary first published in February 2022. It features revised scores for Laval.
