Budgetary transparency report card gives Hamilton city hall an 'F'

A report looking at fiscal accountability and transparency in Canadian municipalities has given Hamilton a failing grade – one of only four out of the country's 32 largest cities to receive such low marks.

"They have had some backsliding that is unnerving, and is such an easy fix," says Nicholas Dahir, research officer at the C.D. Howe Institute and co-author of the report. 

He notes that Hamilton used to release a total of its operating and capital budgets, to show the city's full expenditure for a year, but no longer makes it easy to find that total. He adds that the city still hasn't released its end-of-year financial statements, showing what it spent, for 2023.

"There was a while where I would check the webpage every day and still did not see the 2023 financial statements," Dahir told CBC Hamilton on Thursday. "It broke my heart every time."

Report titled 'Could do better'

The report card, which the C.D. Howe Institute has published annually since 2010, grades cities on things such as how easy-to-find and easy-to-understand its budget information is; whether budgets are finished before the start of the fiscal year; if year-end fiscal statements are available in a timely manner and if budgeting is done using public sector accounting standards, which are the gold standard for municipal budgets, says Dahir.

"We look at how easy it is for someone… to make a determination for themselves," on how the city is spending public money, he says. 

Hamilton also got a failing mark last year, as well as in 2010, the first year of the report. Its highest marks were in 2016, 2017 and 2021. That was before it began posting separate operating and capital budgets without combining them in a summary, said Dahir. 

This year's report was titled "Could Do Better: Grading the Fiscal Accountability of Canada's Municipalities, 2024." Four cities – Richmond, BC, Ottawa, Quebec City and Vancouver – scored marks in the A-range, while Hamilton flunked alongside three others: Gatineau, Regina and Windsor.

"Their Fs reflect multiple problems with transparency, reliability and timeliness," the document states.

Cybersecurity attack to blame for delay: city

In an email to CBC Hamilton, Mike Zegarac, the general manager of finance and corporate services, said the low grade "reflects the impact of last year's cybersecurity incident." 

The city was hit by a ransomware attack in February, 2024, which impacted 228 online "applications" and the city spent much of the year working to restore them.

In his email statement, Zegarac said the attack "delayed the completion of our audited financial statements" which is "one of the two documents used for the Institute's assessment."

"Because the statements could not be finalized and published within their review period, this had a significant effect on our score," he wrote.

"We take the Institute's findings seriously... While the Institute's evaluation focuses on the timing and presentation of audited financials and the budget, it does not capture the full picture of the City's financial health or transparency efforts. Hamilton continues to demonstrate strong fiscal stewardship, as shown by our AAA credit rating—the highest possible from S&P and achieved by only a few Canadian municipalities—and the recent GFOA Distinguished Budget Presentation Award recognizing the clarity and quality of our 2024 budget."

The failing grade also came the same week that the Canadian Open Data Society gave the city a 2024 Open Data Accessibility Award. 

"The City of Hamilton's Open Data Portal provides an intuitive and inclusive platform for residents to explore, visualize, and download city data," states the society on its website. "The portal offers insights into vital topics, including housing, transportation, public health, and economic development, with datasets like Ward Profiles enabling granular, localized analysis."

'Somebody understands this. It's a problem with me'

But Dahir also said Hamilton's budget format makes it hard for the average person to find key numbers, and says the 2024 budget started in February, while the fiscal year starts in January, meaning money was being spent without approval from those responsible for a month.

He also said the budget and year-end financial statements use different accounting methods, making it impossible to compare whether projections match up with actual expenditures.

"There's this impulse to think, 'Somebody understands this. It's a problem with me," said Dahir, suggesting there may even be councillors who struggle to grasp all aspects of the budget in its current format.

"Nobody wants to be the first one to raise their hand and say they don't understand what's happening here."

Chris Erl, a local politics researcher at Toronto Metropolitan University, said deciphering the city budget is "very challenging… even for people who engage with municipal issues regularly. I often tell folks that I have a Ph.D. in municipal government and I still have a hard time understanding the budget."

He says there appears to be a "disconnect" between the experts compiling the budget and the ordinary citizens who have to live with its consequences.

"The fact that the budget is challenging for everyday Hamiltonians to understand is further proof that far too many parts of our local government operate in silos," he says, noting this failing grade could be seen as an opportunity for improvement. 

"Council can move forward with 'plain language' policies that are expanded to ensure an accessible, simplified version of the budget is offered to residents," Erl said. "And, ultimately, council should be working toward a revised communications strategy that meaningfully engages residents with the budget process."