jeudi 11 juin 2009

Financial Review - Analysis & Prediction

Update June 24: Reports suggest that the auditor will be at the municipality Friday July 3.

The Macro (financial accounting) View
As of December 31, 2007 the municipality of Lac Simon had enjoyed 4 years (2004-2007) of accumulated surpluses: $383,185.

In 2008 the municipality of Lac Simon reversed this trend and acknowledged at year end, an operating deficit of $175,500. The 2008 net deficit was $75,500 because the municipality took $100,0000 from the previous years’ accumulated surpluses. Thus the surplus has been reduced to $283,185.

Why such a large deficit? Not because of falling revenues. Revenues have grown from $1,450,000 (2004), $1,585,651 (2005), $1,692,792 (6.8% increase in 2006), $2,009,820 (10% increase in 2007), $2,388,520 (18.8% increase in 2008).

In 2007 while revenues were $2,009,820 we managed a surplus of $55,658 (despite the referendum expense). In 2008, when revenues increased yet again to $2,388.520 we managed an operating deficit of $175,000.

2008: I argue that the reason for the 2008 historic deficit was a horrific rise in expenses, not a shortfall of revenues. Thus, despite an 18.8% increase in revenue in 2008, the growth in 2008 expenses (estimated at 35%) far outpaced revenues, driving the municipality of Lac Simon into deficit.

Moreover, while revenues increased 18.8% from $2,009,820 (2007) to $2,388,520 (2008), our 2008 expenses increased from $1,954,162 ($2,009,820 revenues - $55,658 surplus) to $2,703,000 (outgoing cheques & expenses given out at monthly council meetings), thus $755,658 in ONE YEAR! Note: there are some provincial transfers to compensate the increase in expenses (perhaps road paving).

Surely the municipal bookkeeper, directeur general and/or maire could have raised the alarm issuing an order to cease unnecessary spending in the second half of 2008. They did not. Clearly, as the numbers reveal, excessive expenses actually increased in the final quarter, even into December.

2009: Gross revenues for 2009 are $2,583,539 (7.4% increase in 2009). However net revenues for 2009 are $2,507,989 = ($2,583,539 - $75,500). I argue not only that the municipality
  • wasted up to $300,000.00 in 2008;
  • carried forward $75,500 net deficit into 2009;
  • Missed the bibliotheque expense (see point #10 below) in the 2009 budget;

but also suggest that:
  • Expenses in 2009 will continue to rise because of useless purchases, leases & ententes and general mismanagement;
  • Revenue increases will slow; and as a result
  • There is the potential for another operating deficit in 2009.

Caisse populaire de la Petite-Nation: As per (380-12-2008) la municipality of Lac Simon has requested that the “marge de credit” at the Caisse populaire de la Petite-Nation be increased to $750,000.00. An increase of $450,000 in one year! Was not the previous credit margin of $300,000.00 renewed last July (197-07-2008)?

Our only hope is that the department of Affaires municipales et des Régions curtail our council's spending before 2009 mirrors 2008.


The Micro (managerial accounting) View
I document (below) some of the most glaring 2008 excessive financial outflows. As of December 2008 the municipality of Lac-Simon stopped including “cheques written” at the monthly council meetings.

What have they got to hide?

Will this systemic pattern of spending continue unabated into 2009? Are contracts, leases, ententes being signed that will bleed hundreds of thousands of dollars from our financial ledgers?

Here are some 2008 examples:

1) Competition Pompier: On July 18, 2008 Municipality of Lac Simon issued a cheque (#1726) for $8,000.00 to Cheneville for Cheneville to hold the “Competition Pompier 2009”. What are the economic benefits to Lac Simon? What percentage of the true costs is divided between Cheneville and Lac Simon?

2) Bureau Touristique: In December 2008, Lac Simon passed a motion (381-12-2008) to form “Corporation de development touristique du nord et de la Petite Nation”. What are the real costs of this new “entente”? In April Lac Simon wrote cheque #1532 that included an amount of $5,251.66 to Cheneville for the bureau touristique. In August another cheque #1858 was written for $6,803.40. The December amount is still unknown to citizens.

3) “Premier repondeur”: As per (55-02-2008 ) in February 2008 and (114-05-2008) in May 2008 “mise en place du project” premier repondeur. Are there not provincial subsidies available? Why did Lac Simon never request any? Moreover, in council, the total costs estimated by the maire was $20,000. In reality the costs were probably over ~$100,000.

Has "premier repondeur" been canceled?

4) Pompiers: In October the municipality bought a camion Freightliner 1996 for $25,715.18. Why?

5) Fraternite des Pompiers: The municipality even approved (32-02-2008) in February an “avance de fonds – vehicule” for the Fraternite des Pompiers for $8,772.50. Has the sum been paid back?

6) Travaux publiques: In February (408-12-2007) the municipality bought a Camion Dodge Ram 2008 for $30,326.45. Why? In December (382-12-2008) Travaux publiques bought a camion GMC C5500 2005 for $55,986.46 at a monthly cost of $1,495.00/mois. Why? Why did the buyer (us) pay a $2,000.00 commission?

7) "Architect" Consultant: As per (65-03-2008) the municipality hired an architect as a consultant in March 2008 for “mandat etude centre administrative” for the proposed town hall. Cheques in 2008 to the architect (#1542, #1779, & #2082) total $19,199.45. The proposed march budget was for $16,000.00. What amounts continue to be paid to the architect in 2009?

8) "Human resource" Consultant: As per (53-02-2008) the municipality hired a human resources consultant under the description “assitance au niveau de l’embauche de personnel administrative”. The first cheque (#933) in December 2007 was for $2,506.90. Cheques in 2008 to the human resources consultant (#1374, #1539, #1796, #1900, #2018) total $6,885.39. What amounts continue to be paid to the human resources consultant in 2009?

Why do we need an organizational chart? Why do we need help hiring staff?

and notwithstanding the fact that these 2 expenses were known at the end of 2007:

9) Two severance packages (2008)
How did municipality plan for the approximately $100,000.00 in severance packages to be paid in 2008? The municipality knew in advance that two long time staff were leaving! The bookkeeper received $33,312.35 (313-11-2008). The director general received a severance package of ~$70,000.00 (including “conges et les vacances” package of 300 hours) (94-04-2008) (126-04-2008) and/or (66-03-2008) after her retirement.

10) Biblioteque de Cheneville (2009)
What about the new proposed biblioteque de Cheneville? As per Le Petite Nation last week, the total budget for the building is $494,856.00. The Quebec provincial government is providing a subsidy of $231,732.00. That leaves the municipalities of Cheneville & Lac Simon with a balance of $263,124.

How is the municipality of Lac Simon going pay for its 50% share of the $263,124? Why is there no mention of this amount in the 2009 budget or no request for debt? Moreover, the sum of $8,000.00 was allocated for “bibliotheque” under “Loisirs et Culture” in the Budget 2009, deposited on December 22, 2008. Does that not seem inadequate?

Regarding the budget forecasts of municipalities, the law provides that the council must prepare and adopt a budget and provide revenues at least equal to the expenditures. However, in light of the “bibliotheque”, I would argue that the municipality has not.

1 commentaire:

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