thing). Related to the BTAA is the Balanced
Budget and Ministerial Accountability Act
(BBMAA), which contains a prohibition
against forecasting a deficit. In combination,
the two acts lead to a result that was likely
not anticipated by those who put the original legislation together: Any surpluses that
carry over a fiscal year-end can never be spent.
Consider, as an example, a provincial government agency that receives a $6 million
unrestricted grant from the federal government on March 30, one day before its fiscal
year-end. It would be understandable if the
agency did not spend this grant on March 31—
indeed, unless detailed expenditure plans were
already in place, it would be irresponsible for
the agency to do so. Because the $6 million
grant has no restrictions, there would be no
liability to ever repay the federal government,
so the agency would record the grant as
revenue. The agency might move $6 million
into a reserve fund to ensure that the funds
are earmarked for a specific use, but, as noted
above, a transfer to a reserve is not an expense.
The agency would end up with a $6 million
surplus from this transaction. Once locked
away in accumulated surplus, the reserve
could never be used. It could never fund
expenses because its use (withdrawal from
the reserve) would not create revenue for
accounting purposes—instead, its use would
create an accounting deficit in the year of
expenditure. There would be a mismatch
between the timing of recording the grant/
revenue (when received) and of recording
the expense (when spent). In theory, these
funds could never be used and would remain
locked away indefinitely—not a good use of
taxpayer funds.
The result is a misunderstanding among
taxpayers and elected representatives about
budgeting on a cash flow basis