Gallant government takes on the auditor-general

The Gallant Liberals are taking a political risk by getting into a public fight with the province's auditor-general, according to one of New Brunswick's longtime political observers.

Political scientist Roger Ouellette,of the University of Moncton,says it's a no-win proposition for the government.

Auditors-general "are professional, they're accountants, and they're not really playing politics," he says, pointing to how federal auditor-general Sheila Fraser's work earned her a positive reputation among Canadians.

"So in this battle, I think public opinion may turn to the side of the auditor-general and not to the side of the politicians."

Auditor-General Kim MacPherson delivered a scathing critiqueof the government's 2014-15 public accounts, its final calculation of the province's fiscal position for that year.

• Kim MacPherson slams Gallant government's financial accounting
• Deficit lower than expected, province says

The books show a $388.6 million deficit, but MacPherson says she can't sign off on that number because the province rejected her advice to use public-sector accounting standards for defined-benefit pension plans.

Decision by Liberals 'disappointing'

The government used a different model, known as "defined-contribution," which permits it to only count pension expenses in the year the province makes contributions.

But MacPherson says the province should also account for long-term liabilities, including possible scenarios in which it would have to spendmoney on extra contributions.

Without that, MacPherson said, it's impossible to get a clear picture of the real deficit.

She called the Liberals' decision "very disappointing" and"a major step backwards in terms of the accountability and transparency of the fiscal situation in New Brunswick."

When it first released the public accounts, the government tried to play down MacPherson's decision to qualify the numbers.

"There's a difference of opinion in the accounting profession," Finance Minister Roger Melanson told reporters Thursday morning.

Government saysMacPhersonsigned off on the model previously

But after MacPherson gave media interviews to elaborate on her criticisms, the government contacted some reporters to rebut her more strongly.

The provincial comptroller, Paul Martin, who is the government's in-house accountant, said MacPherson had actually signed off last year on the model she is criticizing this year.

Martin told CBC News that MacPherson gave last year's books a clean audit even though two hospital employee pension funds hadbeen examined under the defined-contribution rules she now rejects.

"She agreed to that in the last two years," Martin said.

It's a tough fight for the government to take this fight to the auditor-general.-Roger Ouellette, political scientist

MacPherson responded to that rebuttal by pointing out those two pension funds are much smaller than the larger public service fund, and so were far less likely to skew the overall deficit figure last year.

"It wasn't enough to qualify the results," she said.

MacPherson pointed out that the larger public service fund was audited using defined-benefit rules last year based on her recommendation, making the Liberal decision "a departure."

Ouellette, pointing out he is a political scientist and not an accountant, says the back-and-forth is a fight the Liberals probably can't win.

"On one side, we have the auditor-generalprofessional, an accountant, a non-political office and on the other side we have a political minister, and a political government.

"People will make up their own minds, but it's a tough fight for the government to take this fight to the auditor-general."

Political scientist J.P. Lewis agrees, saying Sheila Fraser's report on the Liberal sponsorship scandal in Ottawa gave the public a clear idea of the auditor-general's role, and also boosted its profile and credibility.

"There are certain officials who hold a lot of weight," he says. "When they say something, it's a big deal."

Progressive Conservative MLA Blaine Higgswas the finance minister who oversaw the adoption of the shared-risk pension model.

He says MacPherson is right: it reduces, but doesn't eliminate, the risk that the province may have to make extra pension contributions in the future.

"It can move a few percentage points one way or the other, depending on the health of the plan," Higgs says. "There is a variability there."

He says he accepted MacPherson's advice to go with a defined-benefit accounting model even though it led him to report a higher deficit figure.

This year, however, MacPherson said on Thursday, the Liberals decided to change the model, despite her objections.

"It just kept coming back that they were going to stick with their position," she said.