Applying for the Canadian Award for Financial Reporting: lessons learned from Montreal.

• Author: Lefbvre, Normand

In Canada, as in several other countries, the various accounting professional organizations are carrying out research aimed at improving and harmonizing the presentation of financial information in both the public and private sectors. A study conducted by the Canadian Institute of Chartered Accountants (CICA) revealed that government financial statements often contained incomplete and inconsistent information and that it was difficult to compare the financial statements of different governments. To remedy this situation, the Public Sector Accounting and Auditing Committee (PSAAC) was created in 1981, with the goal of improving the financial reporting and accounting practices of governments.

Since that time, the PSAAC (renamed the PSAAB in April 1993) has published several accounting statements, which has led to a developing consensus in favor of accounting and auditing practices that meet the needs of public-sector entities, especially at the federal and provincial level, while at the same time allowing these entities to do a better job of being accountable.

In November 1990, the PSAAC developed for the first time an accounting statement dealing with municipal entities created by the provincial and territorial governments. This accounting statement, and another issued in April 1993, provided guidance for these local governments regarding financial reporting objectives, principles and standards.

The CAnFR

It is this same desire to improve and harmonize financial reporting that led the Government Finance Officers Association of the United States and Canada (GFOA) throughout the 1970s to encourage Canadian local governments to revise their financial reporting practices. During 1986, the GFOA's Canadian Advisory Committee established the Canadian Committee on Excellence in Financial Reporting. The objective of the latter group was to develop a program that would encourage municipalities to publish quality financial reports, while also providing technical guidance. In April 1990, this committee recommended the establishment of the Canadian Award for Financial Reporting (CAnFR), and the program was announced by the GFOA later that year.

Financial reports for the fiscal year that ended December 31, 1990, were the first to be eligible for the program. The GFOA's Canadian Review Committee (CRC) was given the responsibility of reviewing the reports. A unique feature of the CRC was that at least one of the members assigned to review a report would come from the same province as the report under examination. The GFOA's language in which reports were submitted to the CRC remained the choice of the municipality, thus avoiding placing any barrier in the way of Francophone municipalities. In its first year of existence, the CRC awarded three CAnFRs. During 1992, promotional efforts were successful, and the number of award winners among competing governments doubled.

Montreal's Decision to Apply

The City of Montreal participated in the CAnFR program in each of the first two years. Each time, the city received the award. The city's participation was the product of a process that was first begun several years earlier by individuals who completely shared the objectives enunciated by the PSAAC. These objectives were similar to the GFOA's, namely reliability, relevance, usefulness to the reader, consistency and uniformity.

The City of Montreal annually publishes a financial report that uses a format unlike that of many local governments in Quebec. Indeed, in accordance with the city's powers, its official financial report differs from that mandated by the Quebec Department of Municipal Affairs, an agency regulating accounting and financial reporting for Quebec municipalities. This special status gives the City of Montreal more latitude in how it presents its financial information and allows city officials to demonstrate greater creativity.

A practical expression of this creativity was the introduction in the 1987 annual financial report of combined financial statements. Also starting that year, the statement of changes in financial position was modified, and the financial report...