The committee met at 8:31 a.m.

[Peter Milobar in the chair.]

Peter Milobar (Chair): Good morning, everyone. I’ll call the meeting to order. My name is Peter Milobar. I’m the MLA for Kamloops Centre and the Chair of the Select Standing Committee on Public Accounts.

We have two items on today’s agenda.

The first will be the consideration of the Office of the Auditor General’s report titled Beyond the Bottom Line: Navigating the Province of B.C.’s Audited Financial Statements, and this report is in relation to the audit of the province’s ’23-24 financial statements.

Before we get started, though, I would like to take a brief moment to thank our current acting Auditor General, Sheila Dodds, for the great work you’ve done in the interim role over the last little while.

I note that we have Bridget Parrish here, the incoming Auditor General, as well, and we also congratulate Bridget on her appointment and look forward to working with you in the future.

For now, I will turn it over to the acting Auditor General, and we’ll have questions afterwards.

Consideration of
Auditor General Reports

Beyond the Bottom Line:
Navigating the Province of B.C.’s
Audited Financial Statements

Sheila Dodds: Good morning. Thank you, Chair, and good morning, members.

The Office of the Auditor General acknowledges that we live and work with gratitude and respect on the traditional territories of Indigenous Peoples, and we acknowledge that our office is located on the traditional territories of the lək̓ʷəŋən Peoples, the Songhees and Esquimalt Nations.

Government’s financial statements are an important link in the essential chain of public accountability. They are the principal means by which the government reports to the Legislative Assembly and to all British Columbians on its stewardship of public funds. The Auditor General Act requires the Auditor General to report annually to the Legislative Assembly on government’s financial statements, which is our independent auditor’s report.

Our independent auditor’s report is prepared for and addressed to the Legislative Assembly, and it’s published with government’s financial statements in the public accounts. The public accounts are made public by the Minister of Finance. So if the Legislative Assembly is in session, the public accounts will be tabled in the House. Otherwise, they are filed with the Clerk of the Legislative Assembly.

Each year our office has delivered an information report to the Legislative Assembly, drawing attention to our financial audit work. In August of 2025, we delivered an information report on the ’23-24 summary financial statements, Beyond the Bottom Line: Navigating the Province of B.C.’s Audited Financial Statements.

While the audited summary financials are an extremely important document, they are not easy to understand, even for accountants. They are complex, and they are lengthy. Our report on the province’s financial statements for the year-end of March 31, 2024, was prepared to assist readers to understand the financial information and the results presented and understand the role of our audit in assessing and reporting on the reliability of government’s financial statements.

Our report also includes an overview of government’s financial planning and reporting framework, highlighting how the summary financial statements support transparency and accountability for the use of the public funds that were authorized by the Legislative Assembly through the annual budget process.

Today I have three staff with me who are part of the team responsible for preparing this report. As noted, I have Bridget Parrish, the acting Deputy Auditor General, and Bridget and I will be switching roles December 1. I’m very excited to have her starting as the Auditor General.

To Bridget’s left, we have Lisa Moore, who is the assistant Auditor General responsible for our financial audit practice. To her left, we have YiLing Miao, a director in our financial audit group who was part of this team.

[8:35 a.m.]

I would also like to acknowledge Shafir Sawilla, a director in financial audit, who was also part of the team for this report.

The report is related to our audit of the summary financial statements. I would like to acknowledge all of our financial auditors who have contributed in some way to the annual audit of government’s summary financial statements.

Lastly, I wanted to thank the comptroller general and her team for working collaboratively with our staff through the annual audit and the preparation of this report.

With that, I’m going to invite Bridget to walk us through the report on government’s ’23-24 summary financial statements.

Bridget Parrish: Thank you, Sheila.

Good morning, Chair and committee members. I have the pleasure of walking you through this report. It is broken down into three chapters.

The first chapter looks at the fiscal accountability cycle, starting from the budget consultation paper and concluding with the review of government’s summary financial statements that are contained within the public accounts.

The second chapter dives into government’s summary financial statements and is designed to help readers navigate this complex accountability document so that they may know how public funds were managed on behalf of taxpayers and how actual results compare to budget.

The third chapter provides some information about our audit process and explains the value of the audit.

We start by providing some context about the financial accountability cycle. We explain how the provincial budget is created and how the voted appropriations are designed to permit and restrict government spending on government programs and services. We also highlight how the cycle comes to a close with the preparation of the annual financial statements by government and the publication of those financial statements by the Minister of Finance so that they can be scrutinized by Members of the Legislative Assembly and by the public.

It’s not the Auditor General’s audit that closes the cycle of financial accountability. Our audit is designed to support Members of the Legislative Assembly in holding government accountable as they complete their review of those audited financial statements. That’s how the cycle of financial accountability comes to a close.

We noticed that there is no current parliamentary practice designed to give Members of the Legislative Assembly an opportunity to ask questions of the Ministry of Finance about the financial results of the province and how they compare to what was budgeted. Nor is there a mechanism to ask questions of our office about our audit of those financial statements.

Although the audit of the summary financial statements is by far the largest audit carried out by our office, our independent audit report does not get referred to this committee. That is because it is not a report that we deliver to the Speaker’s office for tabling. Our independent audit is published with the summary financial statements within the public accounts by the Ministry of Finance, as required by the Budget Transparency and Accountability Act.

This Beyond the Bottom Line report was prepared as a tool to support MLAs in reviewing government’s financial statements, which are prepared for them. The presentation of this report to the Select Standing Committee on Public Accounts, with witnesses from our office and from the Ministry of Finance, provides committee members with an opportunity to ask questions of our office about our audit of the province’s financial statements and to ask questions of the Ministry of Finance about the financial results reported in the public accounts.

Yet the financial statements can be difficult documents to read, even for accountants. For this reason, the second chapter of our report is designed to assist would-be readers of the financial statements in navigating the statements. We explain how the three statements of operations, cash flows and financial position work together to tell a story about the overall financial health of the province. Along the way, we show how to find and use the accompanying note disclosure to help readers take their analysis beyond the bottom line.

In this first Beyond the Bottom Line report, we use government’s fiscal 2024 summary financial statements as the basis for our chapter 2. So if you follow along with me on page 15 of our report, you will find an image of the government’s consolidated statement of operations. You’ll notice in the top corner of the image that we’ve provided the page number where you can find this statement inside government’s public accounts. In this case, you’ll find it on page 42 of the public accounts.

Our report starts, of course, with the bottom line, where we note that government reported a $5 billion deficit in 2024. But looking beyond the bottom line, we pointed out that taxation revenue had declined in comparison to the prior year. We show the reader how to navigate into the depths of the notes, to page 84 of the Public Accounts, to find a breakdown of taxation revenue that shows a decrease in both personal and corporate income tax.

[8:40 a.m.]

Now turning to expenses on page 17 of our report, we show the reader that health and education spending make up the largest share of the expenses and that they had both increased in comparison to the prior year. We also show the reader how to find information in the notes to the financial statements that categorizes those same expenses but by type. And we can see that salaries and benefits is the largest expenditure and that it increased 16 percent in comparison to the prior year.

Turning to page 19 of our report, we take the reader through the statement of cash flow. This statement starts again with that bottom line being that $5 billion deficit and then showing how the statement breaks down and categorizes the different types of cash flows between operating, capital, investment and financing.

We show the reader that cash flows from operating activities were negative in 2024, meaning that there were insufficient cash flows generated to sustain government operations without either having to borrow or dispose of assets. And logically, we see an increase in cash flows from financing as we see government increase its borrowing.

Lastly, on page 21 of our report, we take the reader through the statement of financial position, which might be better known as the province’s balance sheet. This statement shows the economic health of the province on March 31, 2024.

We can see that debt has increased, but we can also see that investments in tangible capital assets have increased. And we can see that that year’s $5 billion deficit has tipped the province into an accumulated deficit position, where previously we could see a surplus. That’s at the very bottom of the page.

This brings me to chapter 3 of our report. Now that we have helped our report readers in navigating the summary financial statements, we want to make sure that they check out our independent auditor’s report. That’s why in our third chapter we explain our audit process and why it’s valuable.

Our independent auditor’s report will let readers know if there are any aspects of the summary financial statements that are materially misstated and will give them information to help them adjust their review and analysis of the financial statements.

For fiscal 2024, we reported two material misstatements. The first misstatement is the accounting for government transfers originally received for restricted purposes — for example, federal funds received for building a bridge.

Government correctly records these funds as liabilities when they’re received. This is accounting that tells the financial statement reader that government has an obligation to fulfil. They need to build that bridge with the funds they’ve received. However, once the obligation has been fulfilled — the bridge has been built and no further obligations exist — government should be extinguishing that liability.

This is where government’s accounting diverges from the accounting standards. Instead of extinguishing the liability when no further obligations exist, government instead chooses to slowly extinguish the liability over the life of the asset, the bridge. This can take 50 years or more, resulting in statements that don’t provide a true picture of government’s obligations.

This type of misstatement has existed within the financial statements since 2012, when the accounting standards were modernized to include government transfers standard, and this misstatement has grown since then. At March 31, 2024, the liabilities were overstated by $7.67 billion.

The second material misstatement that we reported relates to the omission of information about contractual obligations. Contractual obligations represent costs government has committed to incur in the future by way of signed agreements or contracts.

Our audit found $5.7 billion worth of undisclosed contractual obligations. The magnitude of the missing information prevents financial statement users from understanding the nature and extent to which government’s future resources are already committed.

We report these types of material misstatements in our independent auditor’s report to support readers of the financial statements in carrying out their analysis of the financial statements and their review of the financial statements.

This concludes my presentation. I will now turn it back to Sheila.

Sheila Dodds: Thank you, Bridget.

Chair, that concludes our presentation. We welcome questions from the committee after the Ministry of Finance has had an opportunity for their presentation.

Peter Milobar (Chair): Great. All right. I’ll turn it over to the Ministry of Finance, I guess.

Nicole Wright: Thank you. I have a few slides that we have prepared for the committee.

My name is Nicole Wright, and I am the comptroller general for the province of B.C. I would like to introduce Doug Scott, deputy minister for the Ministry of Finance, who is here with me today.

[8:45 a.m.]

If we go to slide 2, after the title page…. The Budget Transparency and Accountability Act prescribes the rules for preparing and producing the public accounts. Government’s summary financial statements are prepared based on generally accepted accounting principles for senior governments, which in Canada are Canadian public sector accounting standards.

The BTAA assigns the authority to set the accounting policies of government to Treasury Board and authorizes Treasury Board to make regulations that align with existing GAAP. There is one Treasury Board regulation in effect regarding restricted contributions.

On slide 3. The OAG’s report uses B.C.’s ’23-24 public accounts as a reference, and those public accounts were prepared consistently with prior years. The form of the public accounts remained relatively the same as in past years with some added disclosure on dedicated revenues, which you can see in note 39 on page 89 of the public accounts. There were no changes in the legislative framework.

New accounting standards were implemented during the ’23-24 fiscal year related to revenue recognition — revenues that impact the timing of recognition to align with performance obligations. So we had to make some small adjustments to things like drivers’ licences and how we accounted for those. Public-private partnerships, so increased disclosure in taxpayer-supported debt, which we included on page 89. And then purchased intangible assets is a new class of capital assets that we included in the public accounts.

On slide 4. The audit opinion in ’23-24 continued to include the two qualifications that Bridget talked about carrying forward from previous fiscal years: the deferral of restricted contributions and the disclosure of contractual obligations. For the members who have been part of this committee, I’m going to go over this again in terms of the government’s position. It may be repetitive, but for new ones, it’s important.

On slide 5. I’ll start with the deferral of revenue related to restricted contributions, which has been qualified since 2012. The auditor’s report states on page 29, in the last paragraph, that these funds are recorded as liabilities when they are first received because government has a responsibility to spend the funds for a restricted purpose. We found that government has not been extinguishing these liabilities when the funds have been used for the intended purpose and no further obligations exist.

The audit opinion also states that government’s method of accounting for contributions is only appropriate in circumstances where the funding meets the definition of a liability. It goes on to say: “In my opinion, certain contributions from others do not meet the definition of a liability.” So this is really the point on which we differ.

Government’s position is that a liability still exists after the asset is built. Government has an obligation to provide service over the life of the asset for the purpose the funds were received. Treasury Board has established the accounting policy and issued a regulation under their authority in the BTAA that revenue be recognized as the stipulation to use the asset to provide services is met.

This accounting policy is consistent with Canadian public sector accounting standards. The accounting standards for government transfers recognizes that obligations for service delivery can arise from capital grants. Additionally, other provinces, like Alberta, Ontario and Quebec, that follow public sector accounting standards like B.C. also defer restricted contributions.

So we are showing that funds provided for restricted purposes are already committed to our future obligation to deliver services over the life of the asset.

Turn to slide 6. The second qualification is related to disclosing contractual obligations. Our current disclosure includes significant contracts and agreements.

[8:50 a.m.]

The auditor would like to see additional amounts included that we do not agree meet the requirement for disclosure as contractual obligations. Under Canadian public sector accounting standards, contractual obligations that commit government to make certain expenditures for a considerable period into the future are required to be disclosed so that financial statement users understand the nature and extent to which government resources are already committed.

OAG has requested that we disclose the future payments expected to be made under the First Nations Gaming Revenue Sharing agreement. Our disclosure does not include amounts collected on behalf of others, whether to First Nations, municipalities or other organizations, because they do not meet the definition of liability in the standards seen on slide 6. The amounts we collect on their behalf have been conveyed as their right through law and will not be a future liability of government.

Additionally, OAG has requested we disclose the future payments expected to be made under the contracts for physician services. Compensation agreements are not included in the disclosure requirements because government ultimately has discretion over the level of service to be provided. Just like union agreements for wages, governments can alter the level of service at any time.

That concludes my presentation for this report, and I would be happy to take any questions.

Peter Milobar (Chair): Great. Thank you.

Any questions?

I’ll jump in then. Follow the bouncing ball, if you will, on this. I’ll try to not get overly confused, and then I’ll have a second follow-up.

When I look at the Auditor General report on page 15, we have about an $800 million increase in what was the projected deficit to what the year-end deficit actually was. When you look at revenues, despite taxation actually exceeding the projection for the year, we’re at about $2 billion more in revenue for the year. The revenues were higher, yet the deficit still increased by $800 million.

I guess the premise — I’ll start with the basis of this — is that the year before, there was a massive surplus coming because taxation revenue way exceeded what anyone expected because of COVID projections and all of that, and that happened across the country. The government was forced to come back with supplementary estimates to be able to expend those extra dollars of revenue.

But when I go to page 17, we have…. I would note that with revenues, I fully recognize revenues are projections. It’s a lot harder to estimate revenues when you’re dealing with commodity prices and global markets and all of that and taxation estimates and everything. I think everyone understands that revenue projections in a provincial budget should be the thing that fluctuates the most with variations on what is budgeted for.

Yet on page 17, the expected expenditures were $81 billion and the actual expenditures were $84½ billion, which means the government overspent by $3½ billion, but they never came back to the Legislature to ask for any permission to do that.

Can anyone explain how a government is allowed to, by almost 5 percent, exceed its expenditures without any real-time update to the Legislature?

Now, I recognize this report is coming late because of the election timing, but the next year’s report, that we’re going to deal with later, is coming just today as well. It’s kind of a little too late for the public to understand what’s going on with their finances when we get reports — technically, our oversight — this late into the thing.

I’m not saying you have anything to do with timelines. I’m saying that for public awareness, for public scrutiny, I don’t understand how we can see, year after year, especially with a deficit that’s growing higher than projected, expenditures well exceeding what were expected to be for expenditures.

Government ought to, as we just heard, be able to moderate services, moderate contracts, dial things in. That was the premise of slide 6. Yet here it’s spend at will, and you don’t tell anyone you’re doing it until a year and a half later.

I need a little help with that, and then I’ll follow up with the second piece to that.

[8:55 a.m.]

Nicole Wright: I can answer that.

The additional expenditures that get categorized into health, education and social services are the actual spend, and some of those expenditures come from contingencies. This is where we account for what was actually spent.

The budget shows what they were actually budgeted for, what they planned to spend, and there is an amount that we don’t know where it’s going to end up at the end of the year. So the contingencies are actually allocated in actuals to where we actually spent the money. The breakdown of those contingencies is also listed in the public accounts on a separate table, and it shows where that extra spending comes from.

If they go above contingencies, that’s where the supplementary estimates come in. We have to ask for more money outside of the bucket that we were given.

Peter Milobar (Chair): Okay. I guess the reason I asked that is because…. You were discussing slide 6, and you used the physicians as an example — the payments, potential payment structure. When you have health care going $4 billion more in spending than budgeted for, it seems like there was a whole lot of health care spending. And we don’t know, in real time again, whether that was physician payment or where it went into the abyss of health care spending.

Has there not been any thought put to getting better line of sight? All the great words of “transparency” and “oversight” and “overview” sound wonderful, but the reality is that when you’re talking $4 billion in expenditure in health care, a 12 percent difference in what was budgeted for, with no discussion, no scrutiny, no budget estimates discussing that…. We weren’t discussing, in budget estimates, an almost $35 billion health care budget. We were discussing a $31 billion health care budget.

These are large orders-of-magnitude swings in what any opposition or the members of the public would reasonably be expected to try to dig into in that transparency piece that’s supposed to be budget estimates.

Nicole Wright: I can comment on a couple parts of the process.

We have our annual budget process, as you mentioned, where we outline what we’re planning to spend. We also outline the amount that we set aside for contingencies. Those are debated in the House. And you’re right. The contingency amount can be, depending on the year, a significant amount of money.

What we do know is that the other part of our process is that once the actuals come in and we look at what gets spent out of contingencies…. And some of the decisions that are made by cabinet during the year will be ongoing costs, and budgets will be updated. The budget figures will be updated for that planned spending.

Some of them are one-time spends for things that come up that are supposed to be hard to plan for. Wildfire season is one of them. We have a certain amount in our base budget, and we have some money tucked away in contingencies to plan for any variation in that.

In this particular year, health care was one area where government chose to spend money out of contingencies, and that listing is disclosed in the public accounts.

Peter Milobar (Chair): Okay. Again, I guess…. And I know you’ve all watched budget estimates. As the Finance critic, I’m the one that keeps getting asked to ask the questions about contingencies in estimates. And when you ask a question about contingencies, you get no answer on how they’re going to be used.

Reading from Budget 2024, the contingencies, Budget 2024 includes a contingency vote of $3.9 billion.

Oh, sorry, that’s ’24-25. I’ve got to find the other page. I’ll come back to that.

Anyone else with questions?

George Chow: Thank you for the presentation by the Auditor General. It’s very helpful, your document, but I still need help to understand.

[9:00 a.m.]

For example, on page 10, maybe the comptroller general could point out…. So you basically set the expenses…. This is for the ’24-25 statement. It’s $91 million, the category is health, education….

Peter Milobar (Chair): Sorry, George. Is this question on ’24-25?

George Chow: Yeah.

Peter Milobar (Chair): Yeah, we’re on ’23-24.

George Chow: Oh, okay. You’re on ’24.

Kiel Giddens: Thanks very much for the presentations. I know the comptroller general mentioned repetitive information, but for a new committee member, it was helpful to get some of these responses.

Obviously, with some of the Auditor General’s findings on misstatements, some of this has been going on a long time — the contractual obligations being one, and the deferral of revenue since 2012.

Is there any path for reconciling the differences, in the long term, over how this is going to be handled? Or is this something that, for the next coming years, is just going to be carried forward every single year? Just to the comptroller general and the Ministry of Finance.

Nicole Wright: Because we have a regulation, at this point, it’s expected that this will continue. We will continue to account for it this way. However, every year we have this conversation with the OAG and look for options or opportunities to resolve this. It is an ongoing discussion.

There are some key elements that we feel are really important for the public to understand. If we take $7-point-whatever billion into revenue, yeah, it’s a great news story for this government. It wipes out a big portion of our deficit. But what it means is that we’re not showing that those funds are actually restricted for future costs coming down for service delivery that we were given that money for.

Really, this is a discussion that we continue to have about whether we continue to have an obligation or not.

Kiel Giddens: Okay, I have two follow-ups.

Peter Milobar (Chair): Yeah, I think they just wanted to add.

Sheila Dodds: I want to turn it to Bridget in a minute.

I just want it to be clear. The legislation requires that the financial statements be prepared according to the public sector accounting standards, and that’s GAAP. Our audit requires that we audit against that framework. As the comptroller general points out, there’s a regulation under the BTAA which is directed to taxpayer-funded government organizations on how they should be accounting for deferred revenues.

I’d just point out that with the financial statements of those organizations, if there’s a material difference between what’s required under public sector accounting standards and what the reporting is, following the regulation within the BTAA, there could be a qualification in those statements.

With the organizations like the private auditors that are appointed to do the audit of those government-funded organizations, what they are providing is what’s called a compliance opinion. They are reporting that the accounting is different from PSAS but that it is in compliance with the framework, as defined by this regulation. When it comes to our audit on the summary financial statements, we are auditing against PSAS.

I’m going to turn it over to Bridget. She’ll provide a bit more detail on this.

Bridget Parrish: The other thing to note is that that regulation doesn’t apply to the summary financial statements. It only applies to those taxpayer-supported government organizations. It is more of an accounting choice that is based on the definition of a liability, interpreting the definition of a liability and thinking that discretion has been lost, when, from our perspective, it has not been lost.

The nature of an asset does not lose your discretion. Once you’ve built a bridge and are using it as a bridge, the fact that it is a bridge does not create a lack of discretion in how you use it.

An example of something that could create a liability would have to be something where there would be a legitimate need to repay funds if you didn’t adhere to something that is beyond just the nature of the asset. Let’s say the federal government gave money and said: “This bridge can only be operated for public transit, and we want annual reporting on how many transit users are using this bridge every year. If you don’t meet certain targets, you’re going to have to repay some of the money.”

[9:05 a.m.]

Now you’ve got a liability. Now you’ve got something where you have lost discretion. Definitely, we would look at that very differently. That type of transaction would be looked at very differently than the ones that we’re seeing now, where it’s just a straight: “You need to use these funds to build this bridge and operate it for its life.” Obviously, yes, of course you’re going to operate it for its life, but that doesn’t create a lack of discretion that’s required to meet that threshold to be considered a liability.

That’s where we differ in our opinion, but I would also like to point out that we agree on a lot. Our offices agree on all of the accounting, and there’s a lot of it that goes on. We agree on a lot of things. There are just a few sticking points that we’re working through. We’re very hopeful that we can kind of reconcile that, but we’ll see.

We do have some big changes to the accounting coming forward in the next year or so that will completely change the way the financial statements even look. That could be an opportunity. We’ll see.

George Chow: It’s just a general question regarding audit reports.

You actually audit according to the act and the procedure, and you don’t make any comments on the effectiveness of the procedure?

Bridget Parrish: No. The financial audit is very much prescribed by our auditing standards. The wording of the audit report — we’re not even allowed to change that. We have sort of a professional responsibility to keep that wording very, very consistent.

That’s because these auditing standards are used across the globe for entities that are raising funds on public markets. They want to see a very consistent audit report, and we want our audit reports to be able to be used in other countries where we might be raising debt on foreign markets.

We have to make sure that our audit reports are conforming with those requirements. To step outside of that would be a separate engagement, a separate audit that we would have to do on effectiveness, which is a separate part of our mandate.

Mable Elmore: You referenced — I don’t know if it’s too early to talk about — some changes with respect to auditing practices. I don’t know if you can speak to it now.

What does that entail? Is it nationally and also internationally, that context, or what do you expect that to impact?

Bridget Parrish: Yeah, the changes are actually not to the auditing. It’s to the accounting.

We have a new conceptual framework, so that’s going to be a pretty big one. Thankfully, it is very similar to the current conceptual framework. The concepts of assets and liabilities haven’t changed. It is an asset and liability framework, which means we look at those first, and the revenues and expenses kind of fall out of it. That’s the same as it’s always been.

But there are some changes to the reporting model itself. There’s going to be a new type of liability that hasn’t existed before. The format of that statement of financial position — that’s your balance sheet — that’s going to look different.

There are a few changes coming down. That’s going to create a lot of work for the comptroller general’s office because they’re going to have to create statements based on the current. And then they’re going to have to create it based on the new because we have comparative statements in all of these statements.

So you’re going to have one year where you’re doing it twice and we’re going to have to audit it twice. That’s going to be a lot of work for both of us, and we’re working together to make sure it happens.

Mable Elmore: So that’s the transition period?

Bridget Parrish: Yes.

Mable Elmore: Is that nationally informed?

Bridget Parrish: Oh yeah, absolutely. There’s a whole due process involved in setting the public sector accounting standards. All of these standards go through quite a lengthy process of consultation, exposure drafts that take public input on how they’re shaping up. The comptroller general’s office has provided their own comments on those, I’m quite certain, on the reporting model.

But, of course, this would go to all sorts of people who use these same standards. It’s not just the provinces. It would be all the municipalities, First Nations, the federal government. There are a lot of different people using these accounting standards who also have an opinion. The board that sets the standards is looking to serve the public interest as they do that, and they have a whole due process designed to do that.

[9:10 a.m.]

Kiel Giddens: Another follow-up on the incomplete contractual obligations disclosure for the Office of the Auditor General. I do think it is important for the public to understand which government resources are committed in future years, as the Auditor General’s report has noted.

We’ve heard that First Nations revenue-sharing agreements were one of the ones at-risk flagged as well as physician services. Is there an entire full list of these, and could that be tabled for the committee perhaps?

Bridget Parrish: Yes, there is a list. It is based on our thresholds for auditing. An audit provides reasonable assurance, not absolute assurance. We don’t check every single transaction. We have, sort of, thresholds that guide our work. So we can’t say that it would be a fulsome list of every single contract that’s not included.

I’m not sure about whether…. I would have to look into our responsibilities in terms of whether we can provide it publicly or whether it could be provided to members. I have to think about that a little bit.

Sheila Dodds: Or whether the comptroller general could share the list we’ve provided.

Bridget Parrish: Yeah. That might be better.

Sheila Dodds: But can we get back to you on the sharing?

Kiel Giddens: Yes, that would be good. Thank you.

Peter Milobar (Chair): Any other questions on the ’23-24?

I’ll save the rest of my contingency questions for ’24-25.

We will move on to our next report, which sounds very similar, Beyond the Bottom Line: Navigating the Province of B.C.’s Audited Financial Statements, but this time for ’24-25. So once again we’ll hear the presentations and open it up to questions.

George, you’re first on the list, but we need the presentation first.

Beyond the Bottom Line:
Navigating the Province of B.C.’s
2024-25 Audited Financial Statements

Sheila Dodds: Looking forward to the question.

As I mentioned previously with the first report, the government’s financial statements are the principal means by which the government reports to the Legislative Assembly and to all British Columbians on its stewardship of public funds. Our office conducts an audit of these financial statements every year, as mandated under the Auditor General Act.

The purpose of our audit, as Bridget highlighted, is to assess and report on whether the financial statements are true and fair. My independent auditor’s report, which is addressed to the Legislative Assembly, is published along with the summary financial statements in the public accounts each year. The Minister of Finance released the public accounts for this year in August.

Our report on government’s ’24-25 summary financial statements, Beyond the Bottom Line: Navigating the Province of B.C.’s Audited Financial Statements, was tabled two months later, in October.

While the audited summary financial statements are extremely important, as we pointed out, they are complex and can be challenging to understand. This is the document here. The report was prepared to assist readers to understand the key information in the province’s summary financial statements and understand how our audit process and independent auditor’s report contribute to the reliability of the financial statements. Our report uses the province’s ’24-25 public accounts as a reference to help readers understand the province’s audited financial statements.

Today for this report, I have three staff with me who contributed to the report. Again, Bridget Parrish, the acting Deputy Auditor General; Lisa Moore to her left, the assistant Auditor General responsible for our financial audit practice; and Priscilla Lai, principal with our financial audit team.

I’d also like to acknowledge Teresa Stout, a manager in our financial audit group, who was also part of the team. Again I’d like to acknowledge all of our financial audit staff who are involved in the work on the audit of the summary financial statements and my appreciation to Nicole, the comptroller general, and her team for working with our staff through both the annual audit and the preparation of this report.

With that, I’m going to pass it to Lisa, who is going to walk you through our report on government’s ’24-25 summary financial statements.

Lisa Moore: Thank you, Sheila.

Good morning, Chair, Deputy Chair, committee members.

Our report on government summary financial statements for the year ended March 31, 2025, contains two main sections, one on the summary financial statements and one on our audit of the financial statements.

The first section is designed as a guide to help the readers of the financial statements see beyond the bottom line and understand how actual financial results compare to budgeted amounts and what the most recent statements reveal about the financial results and financial health of the province.

The second section of our 2025 report explains the purpose and value of our audit in providing users with assurance about the reliability of the fiscal 2025 financial statements.

Starting on page 6 of our report is the section on understanding the summary financial statements. It describes how the financial information is interconnected through the three main statements, that being the statement of operations, the statement of cash flow and the statement of financial position.

[9:15 a.m.]

Moving to page 8 of our report, we provide highlights from government’s consolidated statement of operations, which is found on page 42 of the Public Accounts. This statement shows that expenses outpaced revenue, leading to a $7.3 billion deficit. That is the bottom line for the fiscal 2025.

Looking beyond the bottom line, taxation revenue increased by 7 percent, while natural resources revenue decreased by 23 percent from the prior year.

The two largest expenses continue to be health and education at 42 percent and 21 percent, respectively, of the total expenses of $91 billion.

A growing portion of the government’s revenue was spent on servicing debt in 2025, with interest expense increasing by 29 percent or $1 billion from the prior year, which is 4 percent of the related 2025 revenue. This means for every dollar earned by the province, four cents, compared to three cents last year, went towards paying interest on debt.

Turning to page 12 of our report, we provide highlights from the consolidated statement of cash flow. It starts with the bottom line of the $7.3 billion deficit and then shows how the statement breaks down and categorizes the different types of cash flows between operating, capital, investments and financing.

Cash flows from the operating activities were a negative $5.8 billion in 2025. This meant that government used more cash than it collected and/or generated from annual operations. This means, once again, there were insufficient cash flows generated to sustain government operations without either having to borrow or dispose of assets. You can also see on this statement that more debt was issued to the province than repaid, a 46 percent increase in borrowing compared to 2024.

Moving to page 14 of the report, we present highlights from the consolidated statement of financial position, also better known as the province’s balance sheet. The statement shows the economic health of the province on March 31, 2025. We can see that cash and cash equivalents increased by 103 percent, total debt increased by 26 percent, the investments in tangible capital assets increased by 11 percent, and the accumulated deficit increased by the $8.4 billion at the bottom of the statement.

Starting on page 19 of our report is the section on the importance of our audit. This section explains how the Auditor General’s audit provides an independent assessment on whether the province’s financial statements are true and fair. Our audit of the summary financial statements was completed on August 1, 2025, delivering on our commitments as communicated in the approved financial audit coverage plan for fiscal 2025.

As our audit process is carried out using a risk-based approach, we focus our resources on areas with the highest risk of being materially misstated.

An area of audit focus for our 2025 audit summary financial statements was corporate income tax revenue. Estimates of corporate income tax revenues are complex and involve significant judgment. Corporate income tax revenues in 2025 are $8.3 billion compared to $6.1 billion in 2024. This includes $1.2 billion attributable to fiscal 2024.

However, changes in estimates are recorded as they become known. Had it been known in the prior year, the $1.2 billion adjustment being part of the estimate, the corporate and tax revenues would have been a more level amount of $7.3 billion in 2024 and $7.1 billion for 2025. However, they were accounted for correctly based on the standards.

In fiscal 2025, our audit identified three material misstatements that were not corrected by government. These were reported as qualifications in the Auditor General’s independent auditor’s report. Two of those qualifications were cited in the 2024 Beyond the Bottom Line report and relate to the province’s deferral of revenues and how it reports some of its contractual obligations.

The third qualification was new this year. It concerned the province’s accounting for its share of a court-approved settlement from major Canadian tobacco companies to offset smoking-related health care costs. On March 6, 2025, the Ontario Superior Court of Justice approved the Companies’ Creditors Arrangement Act plans of arrangement, resolving historic lawsuits against major Canadian tobacco companies. As part of the court-approved resolution, the government of B.C. will receive $3.5 billion over the next 20 years to recover a portion of incurred smoking-related health care costs.

As of March 31, 2025, the settlement arrangement was binding on all the parties and could no longer be appealed. Because the arrangement was binding and provided the province with rights to a stream of future payments, the settlement met the definition of an asset and should have been recorded in fiscal 2025 financial statements.

[9:20 a.m.]

Given the long-term nature of the flow of the funds, government should have estimated an amount to record in the financial statements, taking that into consideration. However, government did not record an asset or any corresponding revenue in fiscal 2025. Instead, they disclosed the $3.5 billion as a contingent asset in the notes of the financial statements. This treatment resulted in both revenues and assets being understated in 2025. It will also result in an overstatement of revenue in future years when the settlement is recorded.

Because there was no amount recorded in fiscal 2025, we determined this was a material misstatement and reported it as a qualification in our independent auditor’s report. We report these material misstatements in our independent auditor’s report to support the readers of the financial statements in carrying out their financial statement review and analysis.

With that, that concludes my presentation, and I will turn it back to Sheila for closing remarks.

Sheila Dodds: Thank you, Lisa.

Chair, that concludes our presentation. Again, we look forward to questions after the Ministry of Finance has gone through their presentation.

Nicole Wright: Since the content of this report is similar to the previous one but uses B.C.’s 2024-25 public accounts as a reference, I will provide a brief overview of the preparation of the ’24-25 public accounts, but I will focus only on the changes that occurred and then open it up for questions.

I’m on slide 2. The Minister of Finance released the ’24-25 public accounts on August 7, 2025. The public accounts were prepared consistently with prior years and followed the same basis of accounting. The form of the public accounts remained the same as previous years, and there were no changes in the legislative framework. There were no new accounting standards adopted in the year.

On to slide 3. The audit opinion in ’24-25 includes the two qualifications from the previous year and a third new qualification on the accounting treatment of the tobacco settlement, as Lisa just described. The Auditor indicated in their opinion that government should have recognized the tobacco settlement as an asset in ’24-25.

On to slide 4. So B.C. disclosed the tobacco settlement as a contingent asset in the ’24-25 public accounts. Government has been involved in litigation against three tobacco companies for decades. In previous fiscal years, we had no contingent asset disclosure because confirmation of an asset was not determinable. At March 31, 2025, the facts supporting this legislation now met the contingent asset criteria, and disclosure was added to note 27 for ’24-25 on page 78 of the Public Accounts.

You move to slide 5. Our difference in opinion with OAG on the accounting treatment for the tobacco settlement is not one on recognition but on a timing of recognition — i.e., when does an asset exist, and when does government control that asset? On March 6, 2025, the court approved a plan to compromise and arrange all claims against the three tobacco companies in Canada. That plan is a roadmap to resolving our claim. It is not the resolution itself. The court approved all parties taking a prescribed series of steps that must be taken to get to plan implementation.

The plan of compromise is not the confirming event because there are specific conditions that must be fulfilled, not wholly in the government’s control, before an implementation date is set, which is the trigger for the province to have claim to payments, and before the notice of discontinuance occurs, which ends the litigation. At March 31, 2025, the plans of compromise were still in progress. Uncertainty still existed on the existence of the asset.

On slide 6, we agree with our legal counsel assigned to this case that the plan implementation date as seen on slide 6 is the binding date based on the terms of the arrangement specifically defined in section 20.1, the binding effect. It was at the plan implementation date when the obligations and entitlements pursuant to the plans became effective and binding. Plan implementation occurred on August 29, 2025, and the tobacco settlement will be included in the fiscal results of ’25-26.

That concludes my presentation for this report. I’m happy to answer any questions.

[9:25 a.m.]

George Chow: On the statement of operations, under expenses, we basically have nine categories, but in the notes on page 85, it further expands on that expense, and that has six categories. They’re completely different. Of course, they come out to the same number, $91 billion. So how many categories do we use in the government when we expand something that you could actually pull out under different categories?

Between those two, there are nine categories in the statement. But under the notes, it’s completely different, except for the interest expense. So how many categories do we have when we actually record an expense for the government so that, in the future, you could pull it out with different kinds of categories?

The second question would be: would the Auditor General be able to do that if they want to look at different expenses?

Nicole Wright: Government creates the functional categories, like health, education, social services. We can report on those for the reader’s enjoyment to show where our money is going.

In the note, we show it on a different breakdown, which we, in our chart of accounts, classified as STOBS, or standard objects. This is where, when we record transactions, we record them as revenues or expenses or assets or liabilities. From an expense perspective, we can break down how we record all of our transactions into salaries and benefits, government transfers, that match where our budgeted information is broken down.

We can do both things. We provide that information to the Auditor General’s office when they come in and audit this information. So they can see it under either category.

George Chow: How many categories do we have? For example, do you have a category for, let’s say, purchasing equipment or computers, machines? You do?

Nicole Wright: Yes. We call those tangible capital assets, and we can break those down by significant types, by buildings or land or equipment.

George Chow: Does the Auditor General have access to that?

Sheila Dodds: Yes, absolutely. We will have audited all of the numbers here in the presentation and the statements. But I think you’re looking at the….

You have the voted appropriations so that you’ll identify what that vote is. Then it gets broken down into the supplementary estimates that will categorize the budget for an entity. It will use the categories that are presented in the note which Nicole referred to as the standard objects. It will break it down by salaries and travel and business expenses, and it all rolls up. So we have access to all of the numbers. We can look at them by entity, by function, by STOB, by appropriation.

Larry Neufeld: I just want to thank everyone for the incredible amount of work that appears to be done here. So, well done.

I will freely admit that I do not come from an accounting background, but there was a word or a description that was given during the tobacco accounting discussion. I’m looking for assistance in how we explain this to the public from a political perspective that is non-accounting background. “Material misstatement.” How do I explain that?

This has been a topic of conversation that I’ve been asked about. How do I explain the meaning of that word in layman’s terms to my constituents?

Bridget Parrish: For us, a material misstatement is a misstatement that is large enough or important enough that it could change a user’s decision-making if they are using these financial statements and they don’t have that information or the information is incorrect. So that’s our bar for when we add it to our audit report and let someone know, because it’s our responsibility to let them know.

[9:30 a.m.]

Now, in relation to this tobacco settlement specifically, the big issue is the timing. It’s just the timing of when it’s recognized. We actually do agree with the comptroller general’s accounting. It’s just late compared to when we would have expected.

We wanted it to be recorded when the asset existed. From our perspective, it existed at March 31, because having the money in your hands isn’t the control. It’s the judgment that was issued that gave the control over that asset.

You can think about that similar to if you gave someone a loan. You don’t have the cash. Somebody else has the cash, and you’re going to receive that cash over 20 years’ time. You still have an asset. You still have a loan on your balance sheet that you’re going to value.

There is going to be a tricky piece of accounting there in terms of: what is the value of it, if we’re only receiving it over 20 years? It’s not worth the whole amount if it’s coming so late because of the time value of money.

Money in your hands today is worth more than money in your hands ten years, 20 years from now. So there will be some accounting to do there that we will be auditing this year when we take a look at what’s been recorded by the comptroller general at this point to record that asset. And the only difference there in terms of our expectations was that it should have been recorded at 2025, not in 2026.

Larry Neufeld: May I follow up?

My question then would be: what, if any…? I don’t know if I want to use the word “advantage.” What would be the differences to government accounting by this discrepancy in timing?

Bridget Parrish: For us, a fundamental concept in the accounting is cutoff. The timing of when you recognize something is one of the most important parts of assessing whether the accounting meets the expectations of the accounting standards or not, so making sure your revenues all are in the year that they should be and not in the next year, and not some of the next years into this year’s.

Same thing with your expenses. Cutoff is a very big piece of our audit work. We focus a lot of our work around: is the cutoff correct?

And this is a perfect example of one where we flagged it as a risk, and we looked into it, and from our perspective, it should have been recorded at March 31.

Kiel Giddens: Just following up on MLA Neufeld’s questions there on the tobacco material misstatement. What would be the effect of…?

What we’ve just heard is that booking the revenue when it’s received is important for a number of reasons. But could the Auditor General’s office explain what it means in these future years for the deficit, for example, if it’s done in the way that the government has chosen to here?

Bridget Parrish: First of all, we haven’t seen how the government has done it yet because we haven’t audited that yet, but my expectation, based on early conversations, is that it will be recorded based on a best estimate of the total value of the $3.5 billion and that it’ll just be recorded in 2026 instead of 2025 fiscal.

Then I expect that as information becomes known about the speed at which we’re able to collect, the speed at which government is able to collect that revenue, that estimate could increase or decrease over time. You might see some little marginal increases or decreases coming through in the statements in future years, as the payments are received, because this particular estimate is based on how profitable those tobacco companies are, and their profits are then going to drive the amount that gets collected in each year.

That’s a very difficult estimate to make, but there is a lot of information coming from those tobacco companies that gives the comptroller general the ability to make that estimate.

But of course, it’s going to be adjusted as we go. As we heard, the estimates are adjusted in the year that we know better information, not retroactively. So it won’t go back and be adjusted in a previous year.

Does that help?

Kiel Giddens: I think that helps. Maybe just a follow-up for the comptroller.

Is there any sort of current plan on how this will be treated in future years?

Nicole Wright: The answer to that question is yes. When we’re dealing with…. We will be looking to account for this as expected by the Auditor General, so we will be booking the entire value of the settlement in this fiscal year, with some valuation on collectability.

[9:35 a.m.]

We’ll book the revenue, and we’ll book the receivable. It will show up on our balance sheet as an amount that’s owed to us by the tobacco companies.

Payments in future years will just reduce that receivable. The revenue is done and dealt with this year. The revenue will offset the deficit and the accumulated deficit in one year. That’s it. End of story.

So future years’ payments just reduce our receivables. There’s no extra accounting or revenue changes in future years.

Peter Milobar (Chair): But to expend that revenue this year, you would need to go borrow the money.

Nicole Wright: If we were going to spend the money, yes.

Mable Elmore: I know you covered it in your presentation, but just with respect to the difference in the term “material misstatement,” the perspective of the Auditor General and comptroller general…. I know you talked about in terms of the timing, that it would be booked. Comptroller general, can you just reiterate that again in terms of the timing of that and with respect to…?

Nicole Wright: Sure. So there are two components, really, that we looked at: the existence of the asset and the certainty of how that asset is and when, and the measurement or the value of the asset.

The value of the asset aside, the real question for us was…. When we’re dealing with an asset, especially one of this size, you want to be certain that it’s going to materialize as an asset and that government’s going to get control of it.

The legal advice we received basically told us that there were a number of preconditions that, if unresolved or any one of the three tobacco companies decided to go bankrupt or pull their operations from Canada, could have caused the global settlement to fail. So it wasn’t a done deal until August 29, when the preconditions were met. The notice of discontinuance of the litigation was done.

This was a decades-long legal settlement. We wanted to be sure that the existence of the asset was going to materialize before we booked $3 billion plus into our…. So we have the ability, under the accounting standards, to disclose it as a contingent asset — that it’s likely to happen. And we disclosed that it’s likely to happen, how much we were planning, we thought we were going to get, as a contingent asset. We felt that was in the best interest of the public, and we will book it fully this year.

Mable Elmore: Just a follow-up.

So if I understand, it’s basically that the settlement has been announced, but you were concerned, in terms of due diligence, just to determine that it was….

Nicole Wright: According to legal, it was a bit more than due diligence. So there was a plan in place. They could have appealed the plan. And that’s the date that the OAG is referencing in March. They could have appealed that plan. They didn’t, right? So as of March 31, there was a plan in place to get to a settlement.

The binding part of that settlement happened on August 29. Irrespective of when the first payment came to us, it was about when we were certain we were going to have control of that asset.

Mable Elmore: So August 29 was the point of no return, basically, for the tobacco companies.

Nicole Wright: Pretty much. Yup.

Sheila Dodds: Thank you, Nicole.

The position of our office in reviewing the settlement agreement was that it was binding as of March 31. There was no opportunity to appeal. That was the position around implementation of that and having that certainty in August. We weren’t talking about the implementation. The accounting standards required that when you have that rate to that asset — and that was confirmed prior to March 31 — it should have been recorded as of March 31.

Stephanie Higginson (Deputy Chair): The tobacco settlement takes up a lot of time, so my wonder is — and maybe this isn’t an appropriate question for these folks — what did other provinces do?

Sheila Dodds: We did take a look at some of the other provinces.

Lisa, did you want to just speak to that? Because you had….

[9:40 a.m.]

I think we looked, and everybody had recorded something as of March 31. I don’t know if it was the full amount or if they had done different amounts, but there was something recorded in the provinces that we looked at. But no other jurisdiction had a qualification related to the tobacco settlement.

Nicole Wright: There are three provinces that reported before the August 29 date: Alberta, B.C. and Saskatchewan. B.C. reported the upfront payment only. Saskatchewan did do an assessment of the asset, a one-time booking of their settlement at net present value. Then we disclosed it as a contingent asset. So three very different accounting treatments.

After the August 29 date, half the provinces — Ontario, Manitoba, Yukon and P.E.I. — have booked the full amount at net present value. There are four other provinces who are only doing upfront annual payments on an annual basis: New Brunswick, Quebec, Nova Scotia and Newfoundland.

Stephanie Higginson (Deputy Chair): Those would all be at March 31?

Sheila Dodds: At March 31.

Nicole Wright: Yes. Because it happened after the date the certainty was resolved, in that case.

Peter Milobar (Chair): I just want to close on this, and then I’ll go back to the contingency.

Just to be clear, though, we’re in a deficit situation as a province, so booking the revenue all in this year…. The only thing that does is that it changes the deficit value because you would have to borrow all of the remaining dollars. You’re technically saying you’re expending them this year as well, because we’re in a deficit. You’re not holding any of the future settlement in a trust fund account to kind of sit there and say: “Oh, next year we’re going to use $200 million for this, and the following year we’re going to use $200 million for that.”

We’re in a deficit, so by pumping it all into the revenue side, it’s just changing the numbers on the spreadsheet. You’re going to need to borrow to still expend those dollars, because if you didn’t book it all as revenue this year, you’d still have to come up with that money for operations.

Nicole Wright: If we did accounting based on the cash basis, you’d be correct. We do accrual-basis accounting.

We agree with the Auditor General that when the settlement is done, it is an asset of government. It’s an asset in its revenue, because it’s for past expenditures. The lawsuit was based on historical health care costs, so the money goes into the central revenue fund to account for past transactions.

So yeah, it will ultimately change the accumulated deficit because it’s kind of like a bit of a windfall. We get funds over time, though, so it’ll show on our balance sheet as outstanding funds that are owed to us.

We could have future valuation changes if the net income of the tobacco companies, in future years, declines to the point where collectability becomes uncertain. We may have to write off part of that asset in future years. It would become an expense at that point.

But any planned future cash outputs…. It will offset some of the spending that we’re doing.

Peter Milobar (Chair): I’m only on my second cup of coffee. I haven’t finished it. So I want to make sure I understood the previous question asked on the last year’s report around contingencies.

When I asked why there weren’t supplemental estimates when expenditures exceeded by billions of dollars what was projected, the answer back was because it was contingencies being expended, and now they are just being accounted for. Is that correct?

When I look on page 10 of this year’s report, when it goes from $89½ billion to $91½ billion of expenditures, that’s because contingencies are finally being accounted for? Is that…? Did I…?

Okay. So that’s correct. I’m very confused then.

[9:45 a.m.]

When I read the budget document for the fiscal that we’re talking about and I go to page 27, which is the revenue-by-source page, that says, as page 8 says, $81.523 billion. So those numbers match up. And then the actual with the audit is $84 billion.

When I look at page 26 on the budget document, which is table 1.3, total expenditures are $89.434 billion. And when I look at page 10 on the audit report, $89.434 billion. So those numbers match up.

The problem is that that $89.434 billion on table 1.3 in the budget document includes contingencies.

Nicole Wright: Sorry, which number?

Peter Milobar (Chair): The $89.434 billion on page 26 of the budget document that we would be tasked with doing budget estimates around includes contingencies in it as part of the expenditures. Contingencies, general and CleanBC — $3.885 billion. And it rolls up into the $89 billion worth of expenditures that are expected.

Now, I’m a little confused. I thought that when I heard the first answer, but it took me a little time to find the other budget documents on my iPad.

We see another expenditure, overexpenditure, of $2 billion in this fiscal. There was no coming back to the Legislature. There were no supplemental estimates. That is $2 billion over and above the $3.885 billion of contingencies that were in the original budget document that we were tasked, as a Legislature, to scrutinize.

I fail to understand…. I understand internal transfers. I understand that one ministry might push some money to the other ministry or things of that nature. A little less egregious, but still not proper oversight.

When any of my critic colleagues are tasked with scrutinizing a particular ministry…. From page 26, if it’s Agriculture and Food and they are asked to scrutinize the $130 million of expenditures that are listed in that budget document, that’s what they’re being tasked with. Not $140 million because of $10 million we don’t know about. It’s $130 million, and that’s what we’re supposed to ask questions about.

In fact, the Chairs that sit in this chair shut us down repeatedly if we try to ask questions outside of the so-called scope of the budget. And when we ask questions about contingencies, we get told: “Well, those are just broad. Those are for future use.”

I fail to understand how this committee and, indeed, the opposition can properly do our jobs if government is allowed to repeatedly spend literally billions of dollars over budget without informing this Legislature that they are doing that. The answer that they were accounting for contingencies actually, frankly, does not hold up to the numbers on the documents, because they are identical, and they are identical with contingencies. They’ve already been accounted for in the $89.434 billion — page 26. Yet the actual is $91.393 billion.

We are running record deficits with a government that is overspending its projected expenditures with zero oversight and, frankly, there’s not one notation of concern by any of the offices up front, which are supposed to be scrutinizing these numbers, pointing out that expenditures are not staying within the framework that they’ve actually been voted for.

When…? Can the Auditor General or can the comptroller general point to the vote that was held in this Legislature for this budget year that we’re looking at that said the government can expend $91.393 billion?

Sheila Dodds: I don’t have the details at hand, but we do look at, as part of the audit, in looking at expenses, that there is the authority for it. And I believe that there is a contingency vote that’s over and above. That is an area that we have actually identified that we want to pay some attention to looking at — on what’s budgeted and how it’s applied to cover expenses during the year.

[9:50 a.m.]

Our purpose, really, is to audit those statements and provide reliable information to committee members and MLAs, to support MLAs in holding government accountable. We don’t get into the whys and wherefores, but we can tell you that it was that $91 billion that was recorded, and it all reflected amounts spent. That’s what the audit is looking at.

Peter Milobar (Chair): But if the audit is not looking at what this building voted to actually allow for expenditures in the year and cross-referencing that, that’s like me telling my kid, “You’ve got 100 bucks to go out tonight,” and them putting $1,000 on my credit card and me shrugging.

Nicole Wright: We monitor the votes, especially near year-end, on a daily basis. And we actually have an accounting in the public accounts and the supplemental estimates by vote. The votes were not overspent in ’24-25.

Peter Milobar (Chair): So how do we get budget documents that show us very clearly on page 26 what the expenditures are expected to be budgeted for with every possible ministry and expenditure under the sun on here? You have Office of the Premier, Agriculture and Food, Attorney General, Children and Family Development. You have all the ministries.

You then go into management and public funds and debt; contingencies, general and CleanBC; pandemic recovery contingencies, of which none were in this year; priority spending initiatives and caseload pressures, none for this year but future years; funding for capital expenditures; refundable tax credit transfers; Legislative Assembly and other appropriations; elimination of transactions between appropriations; prior-year liability adjustments; expenses recovered from external entities; funding provided to service delivery agencies; school districts; universities; colleges and institutes; health authorities and hospital societies; other service delivery agencies; and total expense.

How is anyone supposed to reasonably track the bouncing ball if what we’re being told now is that despite you using the same number to try to balance out in your own audit report…? You use that exact same dollar figure. You don’t use one with other unknown contingencies built into this or some weird quirk of legislative rules that says they’re allowed a certain percentage of contingencies over and above to show us that they’re actually still underspent. You are very clearly showing they’ve overspent by $2 billion.

Nicole Wright: Thank you to Sheila for reminding me that our votes are based on the core CRF. It’s core government, so those are the number of votes that we have.

We consolidate the whole GRE, so it includes things like ICBC, B.C. Hydro. Those aren’t within the vote framework. Those expenditures are all listed and consolidated under a total amount of spend.

Peter Milobar (Chair): Sorry. That still makes no sense of an answer, frankly, because your own document, the Auditor General’s document, is comparing the success of expenditures by government to literally the exact same dollars that are rolled up as a total amount.

And yes, there are nine categories here, then six. It’s all the same amount. There are 30 here. But I’m worried about the final number on the bottom of the sheet. And those are all the same. So that’s what we’re being asked as a committee, as a public, as a legislature to compare and ask questions about in estimates and everything else.

I understand those other areas are in there, but those other areas aren’t broken down in this. If it was, and all of those other areas are suddenly rolled into this, I’d be shocked if it’s only $2 billion over budget, or it should be several billion under budget then. But it’s not.

We’re being asked to compare like for like with no explanation as to where the extra $2 billion came and why there wasn’t supplemental estimates. When I first asked that question, the answer was because it’s an accounting for of the contingencies, but contingencies are already in $89 billion.

[9:55 a.m.]

Forget about budget estimates. Forget about everything else. Why there would not be supplemental estimates when the government is overspending by $2 billion on the exact categories that we’re talking about…. The answer back is contingencies, but those are actually in that number.

How are we supposed to have any transparency or understanding on what’s going on with this government’s spending if we’re being told there’ll be no supplemental estimates because the spending is actually contained within contingencies, but in actual fact, it’s not?

Nicole Wright: The supplemental estimates go to voted appropriations for the core government. We recategorize those expenses, once they’re actually spent, into the different categories of Health and Education.

Unfortunately, the view that we’re looking at here does include the full GRE. When you look at the revenue side, the revenue includes the full GRE. We do compare it against budget, but we only budget for core government.

Peter Milobar (Chair): Again, I’m truly not trying to be argumentative here. But when I look at the revenue side, which is the very next page in the budget book, and the previous page on this…. Again, comparing like number to like number, in the exact same column of the budget document, it says $81.523 billion. On the audit, $81.523 billion, and then there are adjustments made for more revenues coming in or less revenues coming in.

So I am comparing like for like. Again, I go back to the $89.434 billion total that already has contingencies allocated for it. Whether you move it all into Health or half into Health and half into health care, anything else like that, it doesn’t matter because it’s already in the $89 billion.

I’m not taking issue with any individual ministry or lumping together of the nine subsections on this document you’ve created, which is a collation of everything on page 26. I agree with you on that. The point being that on page 26, contingencies are already accounted for in that number.

How are we double counting contingencies? How are we enabling $2 billion this year, $3 billion the year before, of extra expenditures happening in the backdrop when we already have contingencies that are literally billions of dollars more every year than we used to have?

The whole premise of what I’m asking this around is that contingencies pre-COVID used to be around $600 million to $700 million a year. That was your contingency fund. Now we’re into $4 billion and $5 billion and overspending of expenditures on top of that.

Nicole Wright: So I will correct my answer. It’s not strictly contingencies. Contingencies — you are correct — we reallocate within the existing budgetary framework. The $2 billion you’re referencing is expenditures that were consolidated upon the GRE being consolidated with core government.

Sheila Dodds: The financial accounting and the financial statements themselves — they are complicated. One of the complicating factors is that the budget process….

All of the estimates debates and those voted appropriations are done based on the spending that’s authorized for core government. You’re looking at it ministry by ministry. As the comptroller general mentioned, there is vote control that happens. So it’s monitored to ensure that the spending against an appropriation doesn’t go over that voted amount. As the comptroller general mentioned, that’s all disclosed in the public accounts.

The difficulty arises when we’re talking about the financial statements that are consolidated. They summarize all of the financial transactions as core government plus 138 government organizations. There is the voted appropriation for core government, and that’s where the spending control is. But the summary financial statements…. The government creates a consolidated budget, and that’s where those numbers are that are compared to.

There’s a risk of talking about apples and oranges here. Your question is very valid. To understand, there was a budget. Where is the conversation around going beyond that budget, and what was the authority for it? But the spending control that’s tracked is at the consolidated revenue fund level.

Peter Milobar (Chair): Well, respectfully, I didn’t create the apples and oranges. I’m reading from your own documents.

[10:00 a.m.]

Why you would insert matching numbers to a budget document and then, on actuals, add in things that aren’t in the other original number makes absolutely no sense. The $89 billion on your own page 10 directly matches page 26 in the budget document.

Sheila Dodds: We have lifted this from the public accounts.

Peter Milobar (Chair): Yet the actual that you’re showing on page 10…. What I’m now hearing…. First I heard it was contingencies, which it’s not. Now I’m hearing the variation is some unknown other government entities reporting into what previously wouldn’t have been part of a matching document. So either this should be comparing what we saw on page 26 and what the performance of that was or not.

Otherwise, we’re not getting a clear representation. We can have all the bullet points of directing people to this page and that page, which is great, and highlighted boxes. But if your own number set that you’re using is two totally different sets of pulling in expenditures from, one being matching up with page 26, one in actual…. Apparently, what I just heard is a different set of numbers from different agencies being rolled in and collated into that.

That’s the creation of apples and oranges from the Auditor General’s office, not from anyone in this room other than that. I didn’t create this report.

How can the public, how can any MLA, reasonably figure out what’s going on if we’re not actually given documents that are then comparing like for like? If it’s truly a completely different subset of expenditures, why is that not just in its own box?

Nicole Wright: I would like to just add a comment that the public accounts are large, and they have many different views. We compare numbers, apples and apples. The summary financial statements are prepared in accordance with the Canadian public sector accounting standards, and they’re audited on that basis.

We are required to consolidate all the entities under the control of government. That includes core government, which we have a budget process for, and all of the 138 organizations that government controls that are defined in the public accounts as part of the GRE. We are very transparent about which organizations we’re including and which organizations are not included in our financial reporting at the end of the day.

We have supplemental unaudited statements that break down the views to help users understand just what you’re saying. The voted appropriations against what was actually spent by vote is also listed in the public accounts under the unaudited piece. So we do actually spend quite a bit of time trying to explain these numbers in various different ways.

I think it’s good discussion, so happy to help clarify any point of confusion. But I can say that supplemental estimates are only required if we’re going to overspend in a vote where we haven’t allocated or we’ve exhausted contingencies access.

Peter Milobar (Chair): I’ll probably come back to that.

Stephanie Higginson (Deputy Chair): I find the tone in the line of questioning here a little problematic, because the responsibility of these folks here is to look at the numbers, to look at what we estimated, to look at what we spent. That’s very transparent in these documents.

The line of questioning and the concerns are around: where’s the gap? It’s around the process between what was estimated and what was spent. That is not the fault of the people sitting at the other end of this table, so I want to make sure that we are being respectful to the work that the folks have done and not making accusations about the quality of their work.

[10:05 a.m.]

If we have issues with process, then let’s talk about them with the right people. But the quality of work that’s been done here is very transparent, and it does allow the public to be able to see the numbers. There was an estimate, and there was a spend, and there sometimes is a difference. But the process there is not the fault of the people who are sitting here. The quality of their work, as we can see from these numbers, is high and meets all the various accounting standards.

Sometimes there’s this misstatement, which is a tension with the general accounting principles and the public sector accounting principles.

But I’m finding that the conversation that we’re trying to have, that perhaps this isn’t the place to have it and that what we should be focusing on is the numbers in the books.

Peter Milobar (Chair): Well, thank you for that. I am trying to concentrate on the numbers in the books, and I’m trying to understand the books, because right now it seems to be not matching up.

I’m trying to find now note 31, which this references back to. Again, the numbers don’t match up when I’m reading the 100-and-whatever-page financial statement.

I guess what I’m asking, at its core, is…. We’re not being asked on page 10 to compare like for like. The CREs and things of that nature are not on page 20. The only number that matches up to $89.434 billion is on page 26 and other expense collations in the budget document for ’24-25. That does not contain any of these CREs that may or may not be what has made the differential.

I can appreciate, Stephanie, that you’re not happy with this. But when the first question was asked about the differences on expenditures, we were told it’s contingencies. It’s not. Now we’re hearing it’s CREs.

Yes, our fundamental job as a Public Accounts Committee is actually to be the line of sight into these numbers and to scrutinize the heck out of them. I’m not calling into question anyone’s professional integrity or anything. I’m saying that these do not make it possible for us to do our job properly as a committee of oversight for government expenditures.

Now, perhaps the CREs are why we don’t need to have supplemental estimates. Fair enough. But why are CREs included in the actual on page 10 when they’re not included in the forecast of estimates on page 10? Because that’s why we get the apples and oranges.

We weren’t asked to look at the differential between page 26 total and CREs on page 10. All we’re being told is that there might be CREs, and we don’t know for certain that this is CREs that are the differentials.

I go back to contingencies. Contingencies were…. Actually, I was originally going to ask questions about the ever-growing contingencies and if the Auditor General has concerns or recommendations around that. But based on the answers that I was getting on this, I had to dive into this unexpectedly, which is why I’ve been trying to pull up other documents to try to, on the fly, get this line of questioning.

Do the comptroller and the auditor not understand…? If we’re being asked to compare the bottom line of two completely different sets of data, how is that remotely accurate to the reader or the public or anyone as to the fiscal situation of this province and the expenditure control or not of this government? It is, frankly, not even fair to the government then.

Sheila Dodds: Chair, we prepared this report to support this committee in looking at the government summary financial statements. They were tabled in the end of August. They are a dense document. We have pulled in highlights from pages of the Ministry of Finance’s summary financial statements so that there is the opportunity to understand how the statements work together and to be able to look at the results, to look at the bottom line.

The public accounts, the summary financial statements, do present the financial results against the budget. We don’t audit the budget, but that information is in those summary financial statements.

[10:10 a.m.]

The discussion is important, because it’s looking at what that bottom line is. The financial statements that we audit do not include comparisons to the authorized budgets, like the estimate process. This is what we’re focusing on.

I’ll turn to Bridget here.

Bridget Parrish: First of all, I’d like to thank you for the question, because it’s a hard question, and it’s exactly what we wanted. We wanted this report to generate questions of that nature, exactly that nature, like, where things are going to challenge us. It’s a hard question, so we’re madly scrambling here, going: “Do you know the answer to this question?” I think we do know the answer to this question.

The comptroller general has explained that if we’re going to be going out of a voted appropriation, we’re going to need to go for a supplementary estimate, and it’s going to come, and everyone’s going to be debating. But that’s not the case if it is going to be an entity that has an original budget and they are going to be carrying out their activities and they’re outside of core government. Those results can come back and be different and not require coming back for the supplemental. I believe that is correct.

That’s where you’re going to see them go and create a variance between what you were involved in, in voting on, and what has actually occurred, because there are a large number of entities that are outside of core government — your health authorities, for example. Just the Island Health, I believe, is bigger than all of the core government combined, and you’ve got multiple health authorities. So if we see those health authorities having differences in their amounts, it’s not going to be coming through, I believe.

Am I correct about this? I hope I’m correct.

But I think that would be, hopefully, an answer that explains it to some extent. The question helps us know what to be prepared for the next time we do a report like this, which we would hope to do, and how we can best support members with these types of questions. Since this is the first time we’ve done it, we didn’t know what to expect, but I’m very pleased to see the nature of the questions coming so that we know what to do next time to make sure we’re ready to help answer.

Peter Milobar (Chair): I’m truly not trying to be argumentative. Here is the real-world problem. Our job is to highlight what the government is or isn’t doing. So I will go out as Finance critic and point out, and I have repeatedly, that the government is overspending by $2 billion this year and $3 billion last year.

The government’s pushback could quite easily be “No, no, no,” and try to bog it down in some accounting quagmire because I’m using your documents and referencing the Auditor General’s documents as to that. I would point the public to page 10, and anyone that reads page 10, if I referred them to page 26 in the budget and page 10 on this, would come to the same conclusion I did, that the government has overspent by $2 billion.

So if we’re not asked and shown like for like, it makes it pretty hard. And it makes it very easy for either deflection to happen or us being accused of being incorrect or wrong or not knowing what we’re talking about or trying to mislead people or anything like that. It makes it easy for us to try to say to the government that they’re trying to spin things and they’re not being forthright with it. It cuts both ways.

So yeah, we need to have accurate like-for-like documentation presented to us. If you had a second box that showed us the $2 billion broken out on its own, great, but that’s not what’s happened year after year. It is two completely different sets of expenditures being slapped up next to each other, according to this answer.

I have no reason to doubt the answer because I have no ability to dive in and take a look right now. And that’s part of the problem. We can’t do our research as an opposition on the fly based on those most current answers, and that is what this committee is supposed to be doing: digging in and understanding this stuff on behalf of the public.

I’ll just leave it at that, and then I’ll move on to Mable, unless you wanted to….

Nicole Wright: Can I just add a quick, small bit?

As part of the public accounts, there are CRF, or consolidated revenue fund, extracts that are unaudited. So page 122 actually shows the statement of operations just for core government, and it shows the budgeted amounts for those votes against the actual amount spent, and it shows that it was not overspent.

Mable Elmore: I appreciate the conversation and sorting through all of it. I appreciate that.

[10:15 a.m.]

Maybe if you can just clarify now. With respect to my understanding in terms of our process around the voted appropriation or estimates for the core government services, is this correct with respect to the discrepancy — in terms of the $89 million to the $91 million to the $2 billion — that that is the 138? Now, is it GRE, the government reporting entity, or is it a CRF?

Nicole Wright: The CRF is the consolidated revenue fund, and the GRE is the government reporting entity.

Mable Elmore: Yes. Great. In terms of the discrepancy that is not included in the numbers with respect to the 138 government reporting entities…. That’s correct? That’s the discrepancy?

Nicole Wright: Yes.

Mable Elmore: Then with respect to those 138 GREs, those are not included in core government and not included in ministry estimates. Is that correct?

Nicole Wright: Correct.

Sheila Dodds: The CRF is core government. It’s ministries and then some other agencies and bodies, but when you’re looking at voted appropriations, they’re defined for core government. Then from a financial reporting standards requirement, the summary financial statements are required to include the financial results of all of those government entities that are controlled by government.

So you have the ministries, core government, and we audit those. Then there are 138 health authorities, school districts, universities, colleges, Crown corporations. Those entities have their statements audited individually, and we will be here in two weeks with our financial audit coverage plan identifying all of those entities and which ones we will audit and oversee and which ones will have auditors. The results of all of those get consolidated into these financial statements.

Mable Elmore: That’s the piece that’s the 138?

Sheila Dodds: They’re results. What you have is a lot of…. There will be expenses out of the Ministry of Health to health authorities that have to be eliminated when it’s consolidated. But there are a lot of transactions between the CRF, core government, and the entities that government controls. The summary financial statements are the consolidated results.

The comptroller general was just pointing to…. There is supplementary information in the public accounts specific to the consolidated revenue fund, that core government, because the voted appropriations are set for core government. You’ll see a vote matched to a ministry.

Mable Elmore: So the separate, the 138 GREs, are not included in that?

Sheila Dodds: In the CRF, no.

Mable Elmore: Not in the CRF, and not in the estimates, or…?

Sheila Dodds: There is a budget that is prepared for the government reporting entity. Those budget numbers are what the Ministry of Finance includes in its statements against the actual results, but the appropriations are done for core government.

Peter Milobar (Chair): Kiel, there is another meeting after us, so you’ll have to be quick, but I’ll squeeze it in.

Kiel Giddens: I’ll try to be quick here.

I do think that these reports from the Auditor General’s office on helping the public to navigate the province’s audited financial statements are very useful as a summary. So thank you.

We’ve gone through, obviously, two different years here, fiscal years ’24 and ’25. Within the consolidated statement on financial position, we see clearly that the debt has increased 20 percent in fiscal year 2024, and then 26 percent in fiscal year ’25. We see the taxpayer-supported debt-to-revenue ratio in fiscal year ’25 was 128 percent; that’s a notable increase over fiscal year ’24, at 101 percent.

I think these are very large increases, likely on a historical basis — you can correct me if I’m wrong — over the last 40 or 50 years in British Columbia, of increase in debt.

[10:20 a.m.]

One thing that was noted is, obviously, that the audited statements are very important for credit rating agencies to be able to realize what’s going on in the province and to provide advice and a determination on the province’s credit rating.

I’m wondering if the Auditor General’s office can just confirm which metrics are most important for credit rating agencies to look at when they’re considering a downgrade or not?

Bridget Parrish: Actually I think the comptroller general might be better positioned, because I believe credit rating agencies actually have even direct access to information in order to…. Am I right?

Nicole Wright: Yes. The provincial treasury division within the Ministry of Finance spends a lot of time talking with each of the credit rating agencies about their debt portfolio and what they’re planning to do in terms of issuing new debt and retiring old debt. So we have a section in the public accounts that is also supplementary information. Some of it’s audited, some of it’s not, but if you look at the provincial debt summary, it starts on page 137.

It gives specific information about how our total provincial debt is broken down, how it reconciles to what we have on the summary financial statements and what it’s used for. We also talk about the different metrics, so debt as a percentage of GDP. We talk about debt service costs as a percentage of revenue. Those are some of the big ones that the credit rating agencies and the public are most interested in.

Kiel Giddens: Thank you for that. So we’re looking at, in these audited financial statements, the overall financial health of the province.

With those metrics in mind, what we’re seeing in fiscal year ’25 and then moving forward…. As we look into future government budget documents, we’re seeing debt interest payments are going to reach $7.6 billion by 2027-28.

Given what we’ve read in fiscal year ’25 here and then moving forward, is it the Auditor General’s opinion that B.C. is at risk of a credit rating downgrade?

Sheila Dodds: I would say that that’s really not for us to speak to, but we’re helping raise the attention to the financial statements that the Ministry of Finance prepares. We are seeing ongoing deficits. We’re seeing a significant increasing debt. I think it warrants analysis and discussion around that.

Peter Milobar (Chair): Okay, great. Thank you so much.

Any other business?

Then a motion to adjourn.

Motion approved.

The committee adjourned at 10:23 a.m.