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B.C. Finance Minister Mike de Jong during a press conference at the media lock-up in Victoria on Feb. 16, 2016 before the budget was tabled in the B.C. legislature.

John Lehmann/The Globe and Mail

British Columbia's Auditor-General is raising questions about the way the provincial government records revenue it receives from the federal government.

Carol Bellringer's office is taking issue with the surplus recorded for the 2015-16 fiscal year in the annual report on the government's public accounts.

The government recorded revenues of $47.6-billion and reported expenses of $46.9-billion, leaving a surplus of about $700-million.

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The Auditor-General's office says it disagrees with that amount, because revenue from federal government transfers for capital assets was deferred.

Ms. Bellringer says this is the fourth year in a row that her office has differed with the government on the way it records funding from other levels of government.

She has previously concluded that the government should have recorded higher surpluses, and that, over time, the government has inappropriately deferred a total of $4.2-billion.

"As we have stated in previous reports, this practice of recording revenue … clouds the true financial health of the province," Ms. Bellringer said in the report. "Also, when the province's financial statements differ from Canadian public-sector accounting standards, it reduces their comparability, understandability and usefulness."

In response to the audit, the acting comptroller-general said the province's approach to its financial statements is consistent with accounting standards used by senior levels of government in Canada.

"Governments fund the capital requirements of public-sector entities through grants that are restricted for a specific purpose, such as the construction of a school, hospital or highway," Carl Fischer said.

"Those contributions have been recorded as a liability rather than revenue when received because it best represents the ongoing obligation of the recipient to deliver the service to taxpayers for the useful life of the asset."

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The annual audit looks at the financial statements of the province after the government combines the results of more than 140 public organizations – such as Crown corporations, colleges and school districts – to determine whether they are fairly presented based on accounting standards for the public sector.

The report also found that the B.C. Lottery Corp. took in $3.1-billion in revenue in 2015-16. It said the lottery corporation paid out 24 cents in cash prizes for every dollar it took in.

The government also earned $372-million on the sale of assets in the last fiscal year.

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