British Columbia's auditor general says under-reported government revenues can potentially cloud the province's true financial health.

Carol Bellringer made the comments Tuesday after releasing a report on the government's public financial statements for the 2014-15 budget, which included a surplus of almost $1.7 billion.

Bellringer said B.C. should have reported an extra $191 million in revenues from the federal government to build infrastructure projects in last year's budget.

Her audit estimates B.C.'s practice of deferring revenues over a period of decades amounts to more than $4 billion.

"Why should this matter?" Bellringer asks in her report. "For one, deferring the revenue means that government is not recording revenue in these good years. When that revenue is eventually recorded, maybe in years when financial results could otherwise be less favourable, it may cloud the true financial health of the province."

Revenues spread over years

She said the issue revolves around how the government records money it receives from the federal government or others to build capital projects, such as hospitals and roads.

Bellringer said the government should record the money as revenue the year it is received, but B.C. spreads out the revenue reporting over the life of the project.

"For example, if a bridge is constructed over two years, and has a life of 50 years, the standards require the revenue to be recorded in the two years that the asset is built," says her report. "Instead, government records the revenue over the 50-year life of the bridge, a little bit each year."

International debate

The province's office of the comptroller general says it records the revenue as a liability when it is first received and adds it as revenue as the asset is developed and used.

The Finance Ministry said in a statement that deferral of restricted government transfers continues to be an area of debate among standard setters and auditors not just in Canada, but internationally.

"We, like other provinces, have not adopted the change recommended by the Auditor General on this issue," the statement said.

"The long-standing principle in public sector accounting has been to account for these revenues over the lifespan of the program or asset they fund, if they are restricted for that specific purpose."