A strategic alliance for promoting improvements in financial reporting by Canadian municipalities.

• Author: Beauchamp, Tim

The alignment of the GFOA's Canadian Award for Financial Reporting Program with the PSAAB recommendations on accounting and financial reporting enhances the information and tools available to municipalities throughout Canada for improving financial reporting.

The Government Finance Officers Association (GFOA) of the United States and Canada and the Canadian Institute of Chartered Accountants' (CICA) Public Sector Accounting and Auditing Board (PSAAB) have formed a strategic alliance whose purpose is to encourage and promote the publication of high-quality financial reports by municipal governments in Canada based on a set of national accounting and financial reporting standards. Until recently, the development of accounting and financial reporting standards for Canadian municipal governments had taken place primarily under the auspices of a federal government agency and the provincial government departments responsible for municipal operations. Statistics Canada, and its predecessor, the Dominion Bureau of Statistics, had, over the course of more than five decades, devoted significant effort to developing a nationwide consistent code of account classifications.

More recently, the provincial departments had developed detailed reporting guidelines and manuals for municipal accounting and financial reporting in their respective provinces. While the account classifications may have been consistent, neither the guidelines nor the manuals were consistent from province to province when it came to financial reporting. The inconsistency was founded on the inability to reach agreement on:

* a clear perception of which indicators of financial position and annual results the summary financial statements should seek to display,

* determining the reporting entity,

* reporting physical assets and their use, and

* the format and minimum content of summary financial statements.

As a result, the financial reporting requirements of Canadian municipalities remain to this day different from one province to another and, in some cases, within a province.

Two efforts have been underway in Canada that share the common goal of improving accounting and financial reporting by Canadian municipalities. The first deals specifically with the additional disclosure requirements necessary to view the financial information in a broad context, while the other deals with the financial information reported in the financial statements of a municipality.

Since 1945, the GFOA in the United States has been encouraging improved public-sector reporting through its Certificate of Achievement for Excellence in Financial Reporting. In 1986, the GFOA's Canadian Advisory Committee accepted as one of its primary goals the development of a similar program for Canadian municipal governments. As a result, the Canadian Award for Financial Reporting (CAnFR) program was created in 1990.

The CAnFR program was established to improve accountability, credibility, comparability, and completeness in financial reporting. It is designed to encourage municipal governments to provide financial and statistical data accompanied by narrative explanations that build on and explain the information published in their financial statements. The CAnFR sets out rigid disclosure requirements about such things as: the economic and organizational structure of the municipality, statistical information related to local demographics, the municipality's principal corporate taxpayers, the assessment base, and any debt limit information.

Although the CAnFR program improves the financial information presented in annual financial reports, the improvements were made within the context of existing provincial requirements relating to the basis of accounting and the municipal financial...