Trail finances remain well in the black even though the city’s accumulated surplus decreased by $1 million last year.
While $83 million of asset surplus might seem like a lot (down from $84 million in 2012), in terms of running the city, that amount is not the key financial indicator, according to David Perehudoff, Trail’s chief administrative officer (CAO).
The net reduction in accumulated surplus, which is composed of a number of different account balances, is part of a reduction in tangible capital assets.
Assets that have a physical substance and monetary value, such as city-owned real estate, buildings and equipment are considered a tangible resource.
“This can occur and really does not impact the city’s financial position,” the CAO noted. “We would focus more on the other balances including operating fund (surpluses) capital and statutory reserve funds.”
Those balances reflect a net increase of almost $650,000, he added.
The city looks to its cash account or short term investments to pay for acquisitions such as the $1.28 million regional airport the City of Trail purchased earlier this year.
When Trail council and city staff develop a five-year financial plan as part of an annual budget process, capital expenditures and projects are funded through current revenue, other sources of city income such as grants, or from reserves.
Long-term investments including the recent $1.7 million upgrades on Victoria Street were earmarked as a capital expense and funded by tax dollars.
“Because a municipality cannot budget a deficit, effectively planned expenditures must be fully funded from tax revenue or other sources of revenue,” noted Perehudoff.
“In focusing on this number, the city develops a financial plan that is both affordable and sustainable and tries to balance funding from prior years’ surplus to maintain a reasonable level of property taxation,” he added.
Each year after an internal audit, city staff submits its year-end financial statements to an independent accounting firm for an external auditor to verify document accuracy and compliance with legislated standards.
Craig Teindl, chartered accountant with L. Soligo Associates Ltd. made a visit to city hall for Monday’s governance and operations committee meeting and reviewed Trail’s 2013 finances with council members.
Once all the checks and balances were in place, the city’s cash and short-term investment account remains at $10 million but its debt increased by $2.48 million following last summer’s extensive repairs to the Aquatic centre’s heating and ventilation system.
“The city had a stronger net asset position in the prior year,” explained Teindl. “The city is still in a strong financial position, meaning it has enough liquid assets to pay off everyone it owes money to including long term debt,” he noted. “But there is some caution here.”
Trail Mayor Dieter Bogs turned the discussion to the auditing process and asked the accountant if Trail’s annual third party financial review protects the city from a visit from B.C.’s municipal auditor Basia Ruta.
“Rossland just went through a lot, does this level of audit protect us from that?” Bogs questioned.
All financial statements belong to the city, are prepared by the city, and we provide an audited opinion based on that information, replied Teindl.
“We do a financial audit, that (Rossland) was a compliance audit and the two mandates are different.”
The municipal auditor general selects municipalities each year to conduct process oriented audits as part of assisting local government to identify any potential weaknesses or system improvements, explained Perehudoff.
“Trail may be selected for an audit but at this point we are unaware of the direction the municipal auditor general is taking for the upcoming audit cycle.”