TORONTO — Ontario's governing Liberals, who are weeks away from an election, were dealt a blow Wednesday as the province's auditor general said their financial statements "dramatically understate" their deficit by billions of dollars.
The declaration from Auditor General Bonnie Lysyk came in a pre-election report that built on past criticism of accounting principles applied by the Liberals, which she says make Ontario's deficits appear smaller than they are.
The government has not accurately reflected the true cost of its borrowing plan to cut hydro rates by 25 per cent, Lysyk said, while also raising questions about how the province accounts for revenues related to two teacher pension plans it includes on the books as assets.
"The consequences of these major differences between the governments projections and the likely actual deficits are significant," Lysyk said. "They create the perception that the government has more money available to it than it actually does."
Lysyk said the government's deficit projections are off by 75 per cent for 2018-2019, with that jumping to 92 per cent for 2020-2021.
That means the $6.7 billion deficit projected by the government for 2018-2019 will instead be $11.7 billion, Lysyk said, and the projected $6.5 billion for 2020-2021 will actually be $12.5 billion.
"It dramatically understates the expense estimates for two major items," Lysyk said of the government's financial statements.
Under its Fair Hydro Plan, the government will borrow money over the long-term to cut rates immediately. Lysyk said the government has not included the cost of compensating power generators or interest on the money borrowed for the plan.
"The plan gives ratepayers a discount on their hydro bills but someone else still has to compensate power generators for their reduced revenues resulting from the discount," she said. "That someone is the government. And it must borrow to pay this compensation."
Lysyk also raised the issues with the accounting of the Ontario Public Service Employees Union Pension Plan and the Ontario Teachers' Pension Plan, which are jointly sponsored with the government.
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In 2016, the auditor general told the government it did not have a legally enforceable right to unilaterally access the assets, so they should not appear on the balance sheets. She repeated that message Wednesday, adding that if the government could produce a letter proving the co-sponsors agreed it could access the funds she would change her assessment.
Premier Kathleen Wynne, whose Liberals have been trailing in recent polls ahead of the spring election, downplayed the discrepancy, calling it a long-standing "accounting dispute" between her government and the auditor general.
"Those are old discussions and they are ongoing," Wynne said.
Finance Minister Charles Sousa acknowledged that the government and the auditor general's office have been at odds over the issue for years, but said the government is not changing its position on the issue.
"This is an ongoing disagreement between professional accountants. That hasn't changed," he said. "But what I am confirming today, what the auditor general has confirmed, is that the plan that we put forward is prudent, it's cautious, it's appropriate."
Progressive Conservative parliamentary leader Vic Fedeli said the dispute comes down to a "matter of trust" and Ontario voters shouldn't trust a government that is trying to make the books look better ahead of the spring election.
"We the MPPs have been deliberately mislead and so have the people of Ontario," he said. "They have purposely deceived the people."
NDP finance critic John Vanthof said the auditor general has pointed out what should be basic accounting principles used by the government.
"When the government makes a decision ... to spend money it should show up clearly and transparently on the books," he said.
Ontario heads to the polls June 7.