Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Major Public Sector Accounting Standards and the Public Accounts of
the Province Of Ontario, Canada
Joe Abekah and Kofi Baah
This study reviews the Public Accounts of Ontario from 1995 to 2013 with the view
to determining the impact of two major reporting changes on reported financial
statements of Ontario. These are (1) the capitalization of tangible capital asset
expenditures from the 2002/2003 fiscal year, and (2) the consolidation into the
provincial accounts of Broader Public Sector Organizations since the 2005/2006
fiscal year. Results show that while there was an immediate increase (decrease) in
reported surplus (deficit) following the start of capitalization, surplus (deficit) levels
have returned to the pre-capitalization levels. On the other hand, the consolidation
of Broader Public Sector Organizations has consistently led to smaller reported
deficits. The relevance of the effect of these changes to the stakeholders of
provincial reporting is a matter for further enquiry.
1. Introduction
Financial reporting has long been a means by which a government communicates with voters
and other stakeholders about the financial management of the areas and entities under a
government’s jurisdiction. Reporting practices have evolved over the years, from a time when
government financial reporting was largely a record of receipts and payments (cash basis accounting),
to the current situation where government reporting is governed by the prescribed standards of the
Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants, now
Chartered Professional Accountants (CPA), Canada. Thanks to the PSAB standards, public accounts
today, in large measure, follow accrual accounting principles. Ontario actually started using the accrual
basis of accounting for its financial statements from fiscal year 1993/94 (Province of Ontario, 2003).
Even so, some elements of cash basis reporting remained for some time.
Two major changes to reporting by government entities since the adoption of accrual accounting
and PSAB standards are the requirement to capitalize tangible capital assets (PSAB 3150) and the
requirement for consolidation of all government reporting entities (PSAB 1300). In Ontario, these
changes were implemented from the 2002/2003 fiscal year and the 2005/2006 fiscal year respectively.
______________________________________________________________________________
Joe Abekah, University of New Brunswick, Fredericton
Kofi Baah, Ministry of Health, Ontario
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
The purpose of this study is to examine how these two changes have affected reported
government surpluses (deficits) with the view to determining whether reported surplus (deficits) are
better than, worse than, or the same as, what they would have been without the changes. The rest of
the paper is organized as follows: Section 2 provides a brief rationale for the paper, followed by
Section 3 on data
collection and methodology. The results are presented in Section 4 with concluding remarks in
Section 5.
2. Rationale
Users of government financial statements are many and varied, including the general public, legislators, councilors,
investors, analysts and other governments (PSAB 2005), all with different expectations. With so many interested parties,
the importance of government financial reporting cannot be overemphasized. The importance of periodic reporting is
outlined by the PSAB as:
“A government financial report should present information that is useful in evaluating the government's
financial condition at the end of the accounting period and its financial performance during the accounting
period” (PSAB 2005, PS 1000 par. 07).
As the PSAB Handbook further puts it:
“users look to financial statements to provide information about: (a) the sources and types of government
revenues; (b) the allocation and use of economic resources; (c) the cost of goods and services provided in
the accounting period; (d) the extent to which the costs of the period were met by the revenues of the period;
(e) the government's financial position; (f) the stock, allocation and use of non-financial resources; (g) the
extent to which revenues were sufficient to meet expenditures; (h) how the government financed its activities
and how it met its cash requirements; (i) actual results of activities of the period in comparison with those
originally planned and those of past periods; and (j) whether public economic resources were managed in
accordance with legislative authorities.” (PSAB 2005, PS 1000 par. 19)
The importance of government financial reporting is further highlighted by the significant roles the various levels of
government play in the economy, currently about thirty-five percent of Canada’s GDP (Edwards, 2012). The reports also
play a significant role in providing advantages or disadvantages to the reporting government and other political entities.
Therefore, governments have interests in the reporting process as the reporting methods may or may not be in a
government’s overall interest. Both standards in this study have significant impact (in nominal dollar terms) on reported
surpluses (deficits) in relation to the pre-standard adoption situation. Although governments had no option but to adopt the
standards, a government could still be pleased or displeased with a standard depending on how they affect overall
reporting. Knowing their impact also helps other informed users to make better judgements about government activities
and to ascertain whether the new standards provide better information to the varied users of government accounting
information.
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
3. Data Collection and Methodology
Annual Reports, including Consolidated Financial Statements, of the Province of Ontario are published and are
available on line under http://www.fin.gov.on.ca/en/budget/paccts/2013/.
Currently, annual reports and statements dating back to the 1994/95 fiscal year can be individually accessed. The
consolidated financial statements include Consolidated Statement of Operations, Consolidated Statement of Financial
Position, Consolidated Statement of Change in Net Debt, Consolidated Statement of Change in Accumulated Deficit,
Consolidated Statement of Cash Flow, notes and schedules. Information in the statements of operations, financial position,
and cash flows formed the major focus of our data collection. Information from these statements for individual years was
compiled into nineteen-year data sets from 1994/95 to 2012/13. To aid the comparisons, components of the statement of
operations were recast as percentages of total revenues for the respective year and the annual surplus (deficit) was similarly
expressed as a percentage of the year’s revenues.
Fiscal year 2002/2003, the year of adoption by Ontario of the tangible capital asset capitalization standard,
PS3150, served as a new event date from where a review of the impact of the standard began. With the aid of information
from the statement of cash flow, the reported surplus (deficit) was recast to show what the surplus (deficit) would have
been under the pre-capitalization regime. A means test of the surpluses (deficits) ratios over the pre- and post-capitalization
periods enabled us to make summary observations about the impact of capitalization on reporting.
Before the adoption in 2005/2006 of PS 1300, the accounts of Broader Public Sector Organizations, namely, public
hospitals, school boards, and community colleges were not consolidated into the public accounts of Ontario. Fiscal year
2005/2006 was when consolidation into provincial accounts of these broader public sector organizations began in Ontario
in compliance with PS 1300. It served as the new event date from where assessment of the impact of consolidation began.
With the aid of information in Schedule 10 of the consolidated financial statements, the annual impact of consolidation was
determined for the years 2005/2006 to 2012/2013. A means test of the surpluses (deficits) ratios as reported and what they
would have been without consolidation enabled us to make summary observations about the impact of consolidation, as per
PS 1300, on Ontario government reporting.
4. Results of Analysis and Tests
Panels A and B of Table 1 present summary components of revenues and expenses for the Province of Ontario in
nominal dollars with the attendant surplus (deficit) for 1995-2002 and for 2003-2013 respectively. The same information is
presented in ratio (percentage of total revenue) form in Panels A and B of Table 2. They show that various forms of
taxation have constituted seventy percent (70%) or more of provincial revenues every year. Since 2003, however, federal
government transfers to the province have averaged 17% of provincial revenues (reaching a high of 22% in 2011), from an
average of 11.6% during the 1995-2002 period.
Healthcare, Education and Training, and Interest on Provincial Debt have averaged over seventy percent of
provincial expenditures during the nineteen-year period with health care alone averaging over forty percent of provincial
expenditures during the last five years. There were three surplus years (2000 to 2002) during the 1995-2002 eight study
years while there were four surplus years during the 2003-2013 eleven study years. All surplus years were before 2009.
Reported surpluses have always been significantly less than reported deficits. The best reported surplus during 1995-2002
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
(in 2001) represented five percent (5%) of revenues of that year. In contrast, the worst reported deficit during 1995-2002
(in 1995) represented twenty-two percent (22%) of the revenues of that year. For the post capitalization period of 20032013, the best surplus year was 2007 and the reported surplus represented three percent (3%) of revenues that year. The
worst reported deficit (in 2010) was twenty percent (20%) of the year’s revenues. In general, deficits averaged seven
percent (7%) of annual revenues during 1995-2002 and six percent (6%) of revenues during 2003 to 2013 as reported in
Panel A of Table 4. Figure 1 shows the behavior of surplus (deficit) during 1995-2002 (1to 8) and 2003-2013 (9-19).
Figure 1
Reported Surplus (Deficit) Percentages 1995(1) to 2013 (19) as
0.1
0.05
0
1 2 3 4 5 6 7 8 9 10111213141516171819
-0.05
Surplus (Deficit) 95/02
-0.1
Surplus Deficit) 03/13
-0.15
-0.2
-0.25
4.1 The Effects of TCA Capitalization
Capitalization led to the expensing of tangible capital assets (TCA) expenditures over their respective useful lives
following the adoption PSAB 3150 from the 2002/2003 fiscal year. Prior to that, the full expenditure was expensed in the
year the asset was purchased. We expect that initially depreciation per year would be less than the one-time expensing that
was the prior case. If the same annual level of capital expenditures were undertaken, reported surpluses would be higher
(reported deficits would be lower) post capitalization. Visually, Figure 1 does not support this proposition. An
independent-samples T-Test was conducted to compare the average reported surplus (deficit) during the pre-capitalization
period to the surplus (deficit) reported during the post capitalization period. Results are presented in Panels A and B of
Table 5. There was no significant difference between the average reported surplus (deficit) during the 1995-2002 period (M
= -.07, SD = 0.10) and the average reported surplus (deficit) during the TCA capitalization period of 2003-2013 (M = -.06,
SD = 0.07); t(17) = -0.32, p = 0.75. These results suggest that the capitalization of tangible capital assets has not affected
the level of reported surplus (deficit) as a percentage of reported provincial revenues.
The next phase was to look at the reported surpluses (deficits) during the capitalization period to see whether they
would have been significantly different had the province actually continued to report under the expensing regime preceding
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
the 2003 adoption of PSAB 3150. Table 3, Panel A, reports what the reported surplus (deficit) would have been during the
2003-20013 capitalization period if expensing of TCA expenditures had continued. The adjusted surpluses (deficits) are
also recast as percentages of reported revenues. This is also represented by Figure 2 below.
Figure 2
Reported and Adjusted Surplus (Deficit) Percentages 2003 to 2013
0.05
0
1
2
3
4
5
6
7
8
9
10
11
-0.05
-0.1
Reported (%)
-0.15
Adjusted (%)
-0.2
-0.25
-0.3
A paired sample T-Test was conducted to compare the average surplus (deficit) as reported versus what they would
have been had there been no capitalization of TCA expenditures (adjusted). Results are presented in Panels A and B of
Table 5. There was a significant difference between the average reported surplus (deficit) (M = -.06, SD = 0.07) and the
adjusted surplus (deficit) had there been no capitalization (M = -.09, SD = 0.09); t(10) = 4.25, p = 0.00. These results
suggest that the capitalization of tangible capital assets increased reported surpluses in surplus years and reduced reported
deficits in deficit years.
4.2 The Effects of Broader Public Sector Consolidation
The coming into force of PSAB PS 1300, Government Reporting Entity, in April 2005 required governments to
consolidate entities that they control. The standard provides “indicators of control” to determine whether control exists and
the Province of Ontario implemented the standard from fiscal 2005/2006. Before then Ontario did not consolidate the
financial results of some of its broader public sector (BPS) organizations. To comply with PS 1300, the provincial
government assessed the existing legislation and regulations governing about 150 public hospitals, 24 community colleges,
and 103 school boards which were deemed to be controlled by the government. Since the 2005-06 fiscal year-end, the
financial results of those entities have been consolidated and reported as part of the Public Accounts of Ontario.
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
At the time of consolidation certain adjustments are made to the BPS financial information to eliminate interorganizational gains or losses and to avoid double counting. One such key adjustment relates to capital grants (transfer
payments) from the province to the BPS organizations. Under PSAB the province normally records all transfer payments
including capital grants as expense. However, BPS entities defer and amortize capital grants over time on the acquisition of
tangible capital assets. At consolidation, there could be a mismatch in the amounts of the province’s transfer payment
expense recorded as grant revenues by BPS Organizations. Without consolidation adjustment, the net impact will be an
inter-entity gain or loss created on the province’s consolidated financial statements.
We illustrate the impact of the capital adjustment as follows: Assume that the province provides $2 billion as
capital transfer to hospitals for the construction of buildings. That amount will be reported as transfer payment expense on
the statement of operations in the year the grant is made. Hospitals on the other hand would capitalize the $2 billion on
their balance sheets as deferred contribution (liability) subject to straight line amortization of the building (capital asset).
Further assume that the building will be amortized over 40 years. Ignoring the half year rule, the amortization expense is
$50 million per year on a straight line basis. Prior to BPS consolidation, the $2 billion would have been reported as part of
the expenses on the statement of operations in the year the grant was made. With BPS consolidation however, the $2
billion would be adjusted to the BPS revenue to offset the province’s transfer payment expense as an elimination entry. The
impact on the province’s expenses will be the yearly $50 million amortization expense instead of $2billion.
Starting with the reported surplus (deficit) on the consolidated statement of operations for each of the eight fiscal
years from 2005/06, we isolated the impact of BPS consolidation with the aid of information from Schedule 10 of the
consolidated financial statements. Surpluses (deficits) if there were no consolidation were determined. The surpluses
(deficits) were recast as percentages of reported revenues. The results are presented in Panel B of Table 3. Panel C of Table
3 breaks down the dollar impact of consolidation by identifying the contribution from broader public sector hospitals,
school boards, and community colleges respectively. Figure 3 further shows reported consolidated surpluses (deficits) and
what surpluses (deficits) would have been without consolidation.
Panels B and C of Table 3 and Figure 3 show that surpluses would have been smaller than reported and deficits would have
been larger than reported without consolidation. In fact, in 2005-06 and 2007-08 deficits rather than surpluses would have
been reported without consolidation. From Panel C of Table 3, it is clear that since the adoption of PS 1300, BPS
consolidation has cumulatively contributed $19.9 billion reduction in the accumulated deficits of the Province of Ontario.
Proceedings of 6th Annual American Business Research Conference
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Figure 3: Reported Surpluses (Deficits) with/without BPS Consolidation
0.05
0
1
2
3
4
5
6
7
8
-0.05
-0.1
Consolidated
Unconsolidated
-0.15
-0.2
-0.25
4.3 Test of Consolidation impact
After determining what reported surpluses (deficits) would have been if there were no consolidation, a paired
sample T-Test was conducted to compare the average surplus (deficit) as reported versus what they would have been the
case had there been no consolidation of BPS accounts. Results are presented in Panels A and B of Table 5. There was a
significant difference between the average reported surplus (deficit) (M = -.07, SD = 0.08) and the surplus (deficit) had
there been no consolidation (M = -.09, SD = 0.10); t(7) = 2.09, p = 0.04. These results suggest that the consolidation of
BPS accounts increased reported surpluses in surplus years and reduced reported deficits in deficit years.
5. General Observations and Conclusion
The provision of more useful information for decision making by users of public sector accounting information is
the driving force behind the PSAB’s push for the use of full accrual accounting by provincial governments. Our study
reviewed the effects of two significant changes in public reporting by Ontario as a result of this push, namely, TCA
capitalization and BPS consolidation. If overall provincial spending post-capitalization had been at the same levels as precapitalization, we would have expected reported surpluses to be higher and reported deficits to be lower, all other things
being equal. Our tests indicate that the levels of surpluses (deficits) relative to provincial revenues have not been
significantly different after capitalization came into effect in 2002/2003. One explanation could be that governments, aware
of the reporting effects of capitalization, factor that into their expenditure considerations and concentrate on overall surplus
(deficit) levels rather than on the benefits or otherwise of a particular standard.
The other major consequence of the PSAB’s full accrual reporting quest is the consolidation of the accounts of
broader public entities into the provincial accounts. The major impact of this consolidation is a positive impact on reported
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
provincial surpluses and deficits; that is, reported surpluses (on the few occasions that there have been) have been higher
than would otherwise be without consolidation, and the reported deficits since consolidation began have been lower than
they would otherwise have been. Given that surplus (deficit) levels have generally remained the same as they were in the
pre-capitalization and consolidation era, it is reasonable to suggest that “gains” brought about by a PSAB reporting change
are quickly factored into provincial activities so that a tolerable level of surpluses (deficits) are maintained in provincial
financial affairs.
This study is limited in the fact that it is unable to make observations about how stakeholders in the Public
Accounts of Ontario perceive the reporting changes that have emanated from PSAB 3150 and 1300. From our study and
results, however, we can say that governments of Ontario over the years have been happy with the changes. This is because
on the whole the capitalization and consolidation have contributed favorably to the provincial results reported in
compliance with these new standards.
See Appendix 1 for Tables
REFERENCES
CPA Canada (2003). Twenty questions about government financial reporting: federal, provincial
and territorial governments. PSAB. Toronto, Canada.
CPA Canada, 2013. Public Sector Accounting Handbook.
CPA Canada, 2013: Public Sector Accounting Board, PS 1300. Government Reporting
Entity. Toronto, Canada.
CPA Canada, 2013: Public Sector Accounting Board, PS 3150. Government Reporting
Tangible Capital Assets.
Edwards, C. (2012). Can We Cut Government: Canada Did, Cato Institute. May/June
Edwards, C. (2013). Canada’s Fiscal Reforms. Cato Journal, Vol. 33, No. 2 (Spring/Summer).
Ferris, J. S. and Winer, S. L. (2007). Just How Much Bigger is Government in Canada? A
Comparative Analysis of the Size and Structure of the Public Sectors in Canada and the United States, 1929–2004.
Canadian Public Policy – Analyse de Politiques, Vol. XXXIII, No. 2. pp 1-34
Ministry of Finance, Province of Ontario (2013). Public Accounts of Ontario (Various years).
Available at: http://www.fin.gov.on.ca/en/budget/paccts/2013/
Proceedings of 6th Annual American Business Research Conference
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APENDIX 1: TABLES
Table 1
Panel A: Consolidated Statement of Operations, Province of Ontario (1995 – 2002)
1995
1996
1997
1998
1999
2000
2001
2002
Other Taxes
Total Taxation
Government of Canada
Other
14758
9090
4557
2640
1939
1475
34459
7607
3973
15633
9424
5174
2695
1944
1446
36316
7645
4398
16357
9964
5852
2772
2491
1030
38466
5778
5206
16293
10843
7456
2851
2591
1167
41201
5098
6189
17190
11651
7447
2882
2660
1247
43077
4515
8194
17617
12879
8095
3118
2819
1353
45881
5885
11165
18624
13735
9200
3424
2820
1479
49282
6129
9271
19097
13803
6646
3502
2851
1739
47638
7754
8494
Toal Revenue
46039 48359 49450 52488 55786 62931 64682 63886
Expenses
Health Care
Education and Training
Interest on Debt
Social Services
General Government
Other
17848
9421
7832
10607
2255
8205
Total Expenditure
56168 57085 56355 56454 57788 61909 61601 63442
Surplus (Deficit)
10129
Year to March 31 ($ Millions)
Revenues
Personal Income Tax
Retail Sales Tax
Corporations Tax
Employer Health Tax
Gasoline and Fuel Taxes
17775
9761
8255
10439
1558
9297
-8726
17921
8957
8607
9273
1467
10130
-6905
18416
9524
8729
9272
1355
9158
-3966
Source: Adapted from Public Accounts of Ontario, Various Years
19694
9117
9016
11297
1957
6707
-2002
22006
11971
8977
9483
1085
8387
1022
22993
10609
8896
9602
1304
8197
3081
24108
11710
8509
7773
1960
9382
444
Proceedings of 6th Annual American Business Research Conference
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Table 1
Panel B: Consolidated Statement of Operations, Province of Ontario (2003 – 2013)
Year to 3/31
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Personal Inc. Tax
18195
18301
19320
21041
23655
24538
24727
23393
23624
24548
25,574
Retail Sales Tax
14183
14258
14855
15554
16228
16976
17267
17059
18813
20159
20,957
Corporations Tax
7459
6658
9883
9984
10845
12990
6748
5615
8383
9944
12,093
Employer Health
3589
3753
3886
4197
4371
4605
4617
4545
4733
5092
5,137
Gasoline & Fuel
2988
2945
3004
3010
3033
3093
3021
2994
3060
3090
3,100
Revenues
Other Taxes
3137
3233
5027
6131
6178
6230
6015
11325
12534
12765
12557
Total Taxation
49551
49148
55975
59917
64310
68432
62395
64931
71147
75598
79,418
Govt. of Canada
8894
9893
11882
13251
14036
16597
16591
18620
23041
21305
21,661
10164
9359
9984
11057
12051
12093
11486
12242
12470
12870
12290
Other
68609
68400
77841
84225
90397
97122
90472
95793
106658
109773
113,369
Health Care
26127
29218
31510
32834
35698
38168
40747
43164
44773
46476
46,476
Edu. & Training
12788
13918
15475
11599
12058
12618
13215
20592
22372
23448
23,454
Interest on Debt
9694
9604
9368
9019
8831
10298
8566
12274
9480
10082
10,082
Social Services
7959
8645
9224
8502
7697
6482
7165
8719
0
0
0
Gen. Govt
3656
3716
4381
4134
4795
8914
5254
6430
8545
7424
7,413
Other
8268
8782
9438
17839
19049
20042
21934
23876
35499
35312
35164
68492
73883
79396
83927
88128
96522
96881
115055
120669
122742
122,589
117
-5483
-1555
298
2269
600
-6409
-19262
-14011
-12969
-9,220
Total Revenue
Expenses
Total Expenses
Surplus (Deficit)
Source: Adapted from Public Accounts of Ontario, Various Years
Proceedings of 6th Annual American Business Research Conference
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Table 2
Panel A: Component Ratios, Statement of Operations 1995-2002
Year to March 31
Revenues
1995 1996 1997 1998 1999 2000 2001 2002
Personal Income Tax
Retail Sales Tax
Corporations Tax
Employer Health Tax
Gasoline and Fuel Taxes
Other Taxes
Total Taxation
Government of Canada
Other
0.32
0.20
0.10
0.06
0.04
0.03
0.75
0.17
0.09
0.32
0.19
0.11
0.06
0.04
0.03
0.75
0.16
0.09
0.33
0.20
0.12
0.06
0.05
0.02
0.78
0.12
0.11
0.31
0.21
0.14
0.05
0.05
0.02
0.78
0.10
0.12
0.31
0.21
0.13
0.05
0.05
0.02
0.77
0.08
0.15
0.28
0.20
0.13
0.05
0.04
0.02
0.73
0.09
0.18
0.29
0.21
0.14
0.05
0.04
0.02
0.76
0.09
0.14
0.30
0.22
0.10
0.05
0.04
0.03
0.75
0.12
0.13
Total Revenue
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
Health Care
Education and Training
Interest on Debt
Social Services
General Government
Other
0.39
0.20
0.17
0.23
0.05
0.18
0.37
0.20
0.17
0.22
0.03
0.19
0.36
0.18
0.17
0.19
0.03
0.20
0.35
0.18
0.17
0.18
0.03
0.17
0.35
0.16
0.16
0.20
0.04
0.12
0.35
0.19
0.14
0.15
0.02
0.13
0.36
0.16
0.14
0.15
0.02
0.13
0.38
0.18
0.13
0.12
0.03
0.15
Total as % of Revenue
1.22
1.18
1.14
1.08
1.04
0.98
0.95
0.99
Surplus (Deficit)
-0.22
-0.18
-0.14
-0.08
-0.04
0.02
0.05
0.01
Expenses
Source: Adapted from Public Accounts of Ontario, Various Years.
Proceedings of 6th Annual American Business Research Conference
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Table 2
Panel B: Component Ratios, Statement of Operations 2003-2013
Year to March 31
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Personal Income Tax
0.27
0.27
0.25
0.25
0.26
0.25
0.27
0.24
0.22
0.22
0.23
Retail Sales Tax
0.21
0.21
0.19
0.18
0.18
0.17
0.19
0.18
0.18
0.18
0.18
Corporations Tax
0.11
0.10
0.13
0.12
0.12
0.13
0.07
0.06
0.08
0.09
0.11
Employer Health Tax
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.04
0.05
0.05
Gasoline and Fuel Taxes
0.04
0.04
0.04
0.04
0.03
0.03
0.03
0.03
0.03
0.03
0.03
Other Taxes
0.05
0.05
0.06
0.07
0.07
0.06
0.07
0.12
0.12
0.12
0.11
Total Taxation
0.72
0.72
0.72
0.71
0.71
0.70
0.69
0.68
0.67
0.69
0.70
Government of Canada
0.13
0.14
0.15
0.16
0.16
0.17
0.18
0.19
0.22
0.19
0.19
Other
0.15
0.14
0.13
0.13
0.13
0.12
0.13
0.13
0.12
0.12
0.11
Total Revenue
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
Health Care
0.38
0.43
0.40
0.39
0.39
0.39
0.45
0.45
0.42
0.42
0.41
Education and Training
0.19
0.20
0.20
0.14
0.13
0.13
0.15
0.21
0.21
0.21
0.21
Interest on Debt
0.14
0.14
0.12
0.11
0.10
0.11
0.09
0.13
0.09
0.09
0.09
Social Services
0.12
0.13
0.12
0.10
0.09
0.07
0.08
0.09
0.00
0.00
0.00
General Government
0.05
0.05
0.06
0.05
0.05
0.09
0.06
0.07
0.08
0.07
0.03
Other
0.12
0.13
0.12
0.21
0.21
0.21
0.24
0.25
0.33
0.32
0.34
Total as % of Revenue
1.00
1.08
1.02
1.00
0.97
0.99
1.07
1.20
1.13
1.12
1.08
-0.08
-0.02
-0.07
-0.20
-0.13
-0.12
-0.08
Revenues
Expenses
Surplus (Deficit)
0.00
0.00
0.03
Source: Adapted from Public Accounts of Ontario, Various Years.
0.01
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Table 3:
Panel A: Reported and Adjusted Surplus (Deficit) If No TCA capitalization $M; % of Revenues
Reported
Amortizatio n
If No Amtztn
TCA Acquisition
Adjusted
2003
117
715
832
-1323
-491
2004
-5483
785
-4698
-1350
-6048
2005
-1555
801
-754
-1388
-2142
2006
298
815
1113
-1675
-562
2007
2269
838
3107
-2120
987
2008
600
880
1480
-2748
-1268
2009
-6409
988
-5421
-3553
-8974
2010
-19262
3212
-16050
-9066
-25116
2011
-14011
3412
-10599
-10838
-21437
2012
-12969
3647
-9322
-11033
-20355
2013
-9,220
3930
-5290
-11787
-17077
Reported (% )
Adjusted (% )
0
-0.01
-0.08
-0.09
-0.02
-0.03
0
-0.01
0.03
0.01
0.01
-0.01
-0.07
-0.1
-0.2
-0.26
-0.13
-0.2
-0.12
-0.19
-0.08
-0.15
Source: Adapted from Public Accounts of Ontario, Various Years.
Panel B: Reported and Adjusted Surplus (Deficit) if No BPS Consolidation [$Millions]
Reported Surplus (Deficit)
Less BPS Impact
Surplus (Deficit), No BPS
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
298
449
-151
2,269
340
1,929
600
610
-10
-6,409
727
-7,136
-19,262
1,579
-20,841
-14,011
10,405
-24,416
-12,969
2,021
-14,990
-9,220
3,813
-13,033
0
0
0.03
0.02
0.01
0
-0.07
-0.08
-0.2
-0.21
-0.13
-0.23
-0.12
-0.14
-0.08
-0.11
Reported as Revenues %
Surplus (Deficit), No BPS %
Source: Adapted from Public Accounts of Ontario (Statement of Operations and Schedule 10)
Panel C: Decrease (Increase) to Provincial Expense Due to BPS Consolidation [$ millions]
05/06
Hospitals
School Boards
Colleges
Total
459
-88
78
449
06/07
308
-67
99
340
07/08
330
11
269
610
08/09
521
15
191
727
09/10
976
231
372
1,579
10/11
1,488
8,574
343
10,405
11/12
1,241
720
60
2,021
12/13
1,132
2,659
22
3,813
Cum.
Total
6,455
12,055
1,426
19,936
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Source: Adapted from Public Accounts of Ontario (Statement of Operations and Schedule 10)
Table 4: Descriptive Statistics
Panel A: Reported Surplus (Deficit) - Normal Reporting
Mean
Minimum
Maximum
Standard Deviation
Nominal $ Million
1995 - 2002
2003 - 2013
-865
-5,966
-8,726
-19,262
10,129
2,269
5,987
7,129
% of Reported Revenues
1995 - 2002
2003 - 2013
-0.07
-0.06
-0.22
-0.20
0.05
0.03
0.10
0.07
Panel B: Reported and Adjusted Surplus (Deficit): 2003-2013 TCA Capitalization
Mean
Minimum
Maximum
Standard Deviation
Nominal $ Million
Reported
Adjusted
-5,966
-9,317
-19,262
-25,116
2,269
987
7,129
9,830
% of Reported Revenues
Reported
Adjusted
-0.06
-0.09
-0.20
-0.26
0.03
0.01
0.07
0.09
Panel C: Reported and Adjusted Surplus (Deficit) 2006-2013: BPS Consolidation
Mean
Minimum
Maximum
Standard Deviation
Nominal $ Million
% of Reported Revenues
Consolidated Unconsolidated Consolidated Unconsolidated
-7,338
-9,831
-0.07
-0.09
-19,262
-24,416
-0.2
-0.23
2,269
1,929
0.03
0.02
7,896
10,047
0.08
0.10
Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Table 5: Test Results
Panel A: Test Sample Statistics:
1995-2002 Reported (%)
2003-2013 Reported (%)
2003-2013 Adjusted (%)
2006-2013 Consolidated ($m)
2006-2013 Unconsolidated ($m)
2006-2013 Consolidated (%)
2006-2013 Unconsolidated (%)
Mean
-0.07
-0.06
-0.09
-7338
-9831
-0.07
-0.09
N
8
11
11
8
8
8
8
Standard Deviation
0.10
0.07
0.09
7,896
10,047
0.08
0.10
Standard Error
.04
.02
.03
2,792
3,552
0.028
0.034
Panel B: Comparative Surplus (Deficit) Test Statistics:
95-02 Vs 03-13 Reported %
03-13 Reported Vs. 03- 13 adjusted (%)
06-13 Consolidated Vs. 06-13 Unconsolidated (%)
** = two-tail
* = one-tail
t
-0.32
4.25
2.09
df
17
10
7
t-critical
2.11
1.81
1.89
PT(<=t)
0.75**
0.00*
0.04*