CPABC in Focus November/December 2014 | Page 33

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