Many factors contribute to city delay

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Mayor Shari Decter Hirst (FILE PHOTO)

Brandon is one of 45 municipalities in Manitoba that have not received gas tax rebates from the provincial government because they have not filed their required audited financial statements with the Department of Local Government, a government spokeswoman told the Brandon Sun.

The provincial government is withholding approximately $1.3 million in gas tax revenue from the City of Brandon because it has not filed its financial statements for 2010, Mayor Shari Decter Hirst said. She added this amount will increase to a total of $2.65 million if the city doesn’t file either its 2010 or 2011 statements by the end of this month, but that this money will be recouped without penalty when the statements are filed.

Her assessment is similar to that offered by Naline Rampersad, a government spokeswoman for Local Government, who said the city is owed $2.65 million in gas tax rebates. She confirmed there will be no financial penalty to the city for being tardy on its required reports to the Local Government, and that when the statements are filed, the money will be released in full.

The government is holding back $9.7 million in gas tax rebates to the 45 municipalities yet to file their reports as of Thursday.

"(The provincial government) has been very understanding and co-operative with us as we work through this," Decter Hirst said. "We’re still dealing with the balance sheets and the issues surrounding our asset values."

Decter Hirst said a number of factors came into play which delayed the submission of reports to the province but it started when the accounting software and system used by the city crashed and could not be recovered. There was no city treasurer in place when she took office in 2010 and the lead person who would normally have taken the city through its required transition to public sector accounting was not in place.

"Nor was the assistant treasurer, and Val Rochelle (Brandon’s director of finance) led us through our first budget," Decter Hirst said. "We didn’t have a complete team to get us through that changeover. Couple that with the entire Bellamy financial reporting system failed. It wasn’t that there was no backup file. The system was gone. It would have had the same effect if you took the whole thing and threw it into the Assiniboine River."

A new accounting system and software had to be put in place and because of the public sector accounting methods required by the province, that meant manually going through boxes of paper in storage on every piece of infrastructure in the city — above ground and below — and every repair to that infrastructure so the city could place a value on its assets.

"We literally have had to go through cardboard boxes to find out what the cost was at the time the infrastructure was installed, the dates it was repaired and how it changed the value," Decter Hirst said. "It means two big changes to us. We have always valued assets like any other business, like a car, or a bus.

"For the first time, we have to put a value on a dike, a road and sewer pipes, and some of that is 100 years old. But we can’t depreciate any of that until we place a value figure on it and if it hasn’t been done before, we have a lot of pipes, sewers, walkways and roads in this city. And if we know it has been repaired, well that hasn’t been depreciated yet either. Then we have to go through the notes to reconcile all of the information. And if we have to go back to 2009, because we do comparative statements year on year, we had to go through it all. That’s causing us a hiccup."

However, the accounting system crash also affected its property tax and utility bills reporting, and since that brings in money to the city, the highest priority was placed on that system first before the financial reports, Decter Hirst said.

Then the flood of 2011 came in, and with it, huge expenses to keep waters from people’s homes and businesses. While many of those dollars can be recouped through disaster financial assistance programs, those dollars are only available if the paperwork is filed before the program’s deadlines. Decter Hirst said because the gas tax money was not in danger, and that the disaster financial assistance dollars would be lost if those deadlines were missed, the priority became getting the disaster financial assistance paperwork completed and filed with the appropriate departments, Decter Hirst said.

Now that work on the disaster financial assistance claim is nearing completion, the treasury department’s efforts have regrouped on getting the 2010 and 2011 statements done. They are being completed at the same time so the comparisons can be done and the statements reconciled with each other.

"We had to build the wheel for 2010 anyway, so we’ll do 2010 and right behind that, the statement for 2011 and the year to date for 2012," Decter Hirst said. "For the first time, we are also filing statements for all of the entities we are involved in, such as the Keystone Centre."

Decter Hirst said because the city is a part-owner of the Keystone Centre, it needed to account for that in its own public sector accounting reports and needed to get statements from them to fill out their own paperwork. That process had to be repeated with any joint-effort where the city has an ownership interest, such as the library and the planning board.

"Our statements are going to look really strange when the community sees them because we are going to have the revenue and expense statement for the Keystone Centre because half of that is ours even though it’s not an asset we have control over."

Most of the city’s audit and finance committee members — Decter Hirst and councillors Murray Blight (Victoria) Jeff Fawcett (Assiniboine) and Stephen Montague (Richmond) — were aware of the situation and discussed it at the committee’s June 20 meeting. Montague said he was not present at the meeting because of work commitments.

At that meeting, it was determined the reports for 2010 and 2011, currently being completed simultaneously, are expected to be completed and filed by the fall.

"It wasn’t a concern to us because we knew what was going on," Fawcett said. "We are just trying to get our audits in as fast as possible. The biggest delay has come from the transfer from the old system to the new one, which has been a general nightmare as far as I’m concerned, but it is in place and is working now. We’ve been told right from the beginning this was going to be late."

Fawcett also noted during this period there were three major changes in the city’s treasury staff that added to the delay, as the city was already trying to transition into the new public sector accounting model required by the province.

"The gas tax funding is a sure thing and we will have our statements in fairly soon," Fawcett said. "Then we will get our money.

"There are legitimate reasons for this delay and I don’t expect to see delays beyond this, going forward."

Fawcett noted that it was possible that other councillors were not aware of the situation because they don’t sit on the committee.

"We are not all aware of what’s going on with every board and I have faith in my fellow councillors that they are doing their jobs," Fawcett said. "I’ll take some blame for this because I gave a written report two (council) meetings ago on the audit and finance committee and though we had discussed this situation then, I didn’t bring it up in our minutes or the reports because we thought the situation was understandable and we were going to get it in. I didn’t deliberately keep that from our report to council. Now it’s an issue and I regret not putting it in."

According to the audit and finance committee’s report to council on July 9, work on the general fund and utility fund reports revealed the city generated a $800,000 surplus in 2010, in part due to the sale of the Fleming School property. The surplus in either the general fund or the utility fund will be allocated to the reserves for the 10-year-capital plan. The preliminary figures for 2011 indicate there will not be a significant surplus in 2011, though those files are currently under review.

The report also gave a provisional indication on the city’s financial position as of April 2012. At that point, the general revenue fund had a surplus of $170,300 and the utility fund’s projected surplus was $102,500. A required increase in payments into the Municipal Employees Pension Plan leaves the Human Resources department in a $240,000 deficit.

"The city is on track budget-wise for 2012," the report states.

» kborkowsky@brandonsun.com