Report of the Independent Financial Commission of Inquiry
On July 17, Ontario's Government for the People created an Independent Financial Commission of Inquiry into Ontario's past spending and accounting practices. Under the direction of chair Gordon Campbell and commissioners Dr. Al Rosen and Michael Horgan, the inquiry was authorized under the Public Inquiries Act, 2009 to assess the previous government's accounting practices, and to provide advice and recommendations on how the government can restore trust in Ontario's finances. On August 30, the Commission delivered its report. The full report is available at https://www.fin.gov.on.ca/en/report/ifci-2018.pdf.
- The Province has reported deficits in 20 of the previous 27 years. Over the same period, Provincial net debt grew by $263.2 billion and Ontario's ratio of net debt-to-GDP ratio grew from 13.4 per cent to 38 per cent.
- Borrowing gives rise to intergenerational inequity concerns. Paying for programs and services Ontarians enjoy today through debt imposes costs on future generations who will have to pay back that debt and may not receive the same level of programs and services.
- There was a deterioration in the relationship between the government and the Auditor General over time.
- The previous government counted the assets from two jointly sponsored pension plans as their own to balance the budget, contrary to the Auditor General's opinion.
- The previous government pursued a costly and convoluted implementation model for global adjustment refinancing, a major component of the Fair Hydro Plan. Not only were the accounting practices problematic, but the policy decision lacked transparency and represented significant costs and risks.
- As currently designed, the global adjustment refinancing model would result in financing costs up to $4 billion greater than if the government had financed the plan directly.
- One-time revenues or ongoing losses of income streams from the sale of assets like Hydro One impact the reported deficit and can compromise the usefulness of deficit figures as critical indicators of trends in the Province's fiscal health.
- Adjustments to the Budget Plan for 2018-19 revise the baseline to a $15 billion deficit.
- Establish transparency for the taxpayer and general public as the top priority in the preparation of the Budget, Public Accounts, and other financial reports.
- Ensure accounting practices of the government should be in accordance with the letter and spirit of Canadian public accounting standards.
- Take an active role in the standards-setting process led by the Public Accounting Sector Board to identify and address accounting matters of particular importance to the Province.
- Restore a constructive, professional relationship between the government and the Auditor General in a manner that respects the Auditor General's legislated independence.
- Require that the Auditor General is given advance notification and is asked for comment when a ministry or an agency consolidated in the financial statements of the Province proposes to engage a private-sector firm for accounting advice.
- Require that the Province approve, after consultation with the Auditor General, the retention of the same private-sector firm for both accounting and auditing services.
- Engage the Auditor General in an effort to reach agreement on the accounting treatment of any net pension assets of the Ontario Teachers' Pension Plan (OTPP) and the Ontario Public Service Employees' Union (OPSEU) Pension Plan.
- Adopt the Auditor General's proposed accounting treatment for any net pension assets of the OTPP and OPSEU Pension Plan on a provisional basis, until an agreement is reached between the government and the Auditor General.
- Review the methodology for establishing fair market values for plan assets and the management assumptions used to determine long-term liabilities for the OTPP and OPSEU Pension Plan. Begin this work following the release of Public Accounts of Ontario 2017-2018, and establish periodic reviews in the future.
- Adopt the Auditor General's proposed accounting treatment for global adjustment financial model, which is a major component of the Fair Hydro Plan.
- Revise Budget 2018-19 to reflect the Commission's proposed accounting adjustments and restore the reserve to its historical level of $1 billion.
- Establish a fiscal plan that includes near- and medium-term deficit targets and clearly describes how the government will achieve and report on these targets.
- Undertake a review the Fiscal Transparency and Accountability Act, 2004 to improve its effectiveness in guiding government fiscal planning and reporting.
- Conduct analysis to determine and set an appropriate target and timeline to reduce the Province's ratio of net debt to GDP.
- Set a long-term goal of restoring the Province's AAA credit rating.
- Expand Ontario's Long-Term Report on the Economy, published two years into each mandate, to include additional analysis on fiscal sustainability and on the fiscal implications of current trends and future risks.