Government rejects auditor’s claim, concludes $10.7B pension surplus an asset

Queen’s Park is sticking with accounting experts that concluded the auditor general miscalculated when she claimed the government could not count $10.7 billion of taxpayer-funded pension surpluses as assets.

Thestar.com
Feb. 16, 2017
By Robert Benzie

Queen’s Park is sticking with accounting experts who concluded the auditor general miscalculated when she claimed the government could not count $10.7 billion of taxpayer-funded pension surpluses as assets.

Treasury Board President Liz Sandals said the government is taking the advice of Tricia O’Malley, Chair of the Canadian Actuarial Standards Oversight Council, over auditor general Bonnie Lysyk.

“Recognizing the asset will provide an accurate representation of the province’s financial position. This means that the province will continue to represent pension assets on its financial statements as it has since 2001,” Sandals said Thursday.

Her comments came Lysyk insisted the co-sponsored Ontario Public Service Employees’ Union Pension Plan and the Ontario Teachers’ Pension Plan shouldn’t be booked as assets because the government does not have ready access to the funds.

The legislative watchdog said she would only issue a “clean audit opinion” of the province’s books this year if she receives proof “in writing” from the unions that they are okay with the government counting the surpluses a public asset for accounting purposes.

“Show me the letter that says you can use that pension money with permission – with an agreement,” Lysyk told reporters at Queen’s Park.

“Until that happens, the bottom line is this office can’t give its stamp of approval on this particular issue.”

There has been no suggestion the government intends to raid the pension funds, which would be illegal. The question is whether the pension surplus can be counted as an asset or not at all.

The accounting dispute is worth the equivalent of $1.5 billion to the province’s bottom line this year and could be the difference between Premier Kathleen Wynne’s Liberals balancing the books or remaining in deficit.

On Monday, a panel of four government-appointed outside accounting experts led by O’Malley ruled the funds are indeed a public asset.

“We believe that an asset does exist -- the net pension asset meets the definition of an economic resource, which is what an asset is,” she said, dismissing the dispute as “a difference of a professional opinion” between bureaucrats and the auditor.

“Many government assets are not accessible. A road is an asset to a government because it allows it to provide public services of transportation, but you can’t move a road or you can’t sell a road unless it’s a toll road, but it’s still an asset.”

Also on the expert panel were Murray Gold, a partner at Koskie Minsky LLP, Uros Karadzic, a partner at Ernst and Young, and Paul Martin, comptroller of the New Brunswick government.

As for Lysyk’s demand for permission in writing from the unions, Sandals noted the panel “concluded that the government does not need a letter from either of the unions because the joint pension agreements spell out how the surplus will be dealt with.”

“There are no public-sector accounting standard requirements for any additional letter to be in place specifying when or by how much contributions will be reduced beyond the joint pension plan agreements already in place,” the treasury board president said.

But Lysyk, who blindsided the government in September by reversing her position on surpluses that had signed off on by her and her predecessors for years, was defiant.

“This isn’t about me,” she said.

“It is not my money. That money is for the benefit of employees and retirees ... so it’s not my pension. It’s not my budget deficit.”

The actuarial spat means the auditor general will likely issue a “qualified audit opinion” of the government’s books instead of a “clean audit opinion” later this year.

Essentially that could be seen as the accounting equivalent of an asterisk in the sporting record books for disputed achievements because her qualified audit opinion is unlikely to affect the government’s credit rating.