The Town of Ladysmith received an audit report completed by MNP, one of Canada’s largest accountancy firms.
Chartered Professional Accountant, Cory Vanderhorst presented the findings to council at the April 20 regular council meeting.
The Town holds $35 million in total financial assets, $17.9 million in debt and $32.1 million in total liabilities — which refers to expenses like wages payable, accounts payable, and deferred revenue — overall the Town has net financial assets of $2.8 million.
Total revenues for the Town were down in 2020 due to a drop in user fees for Town facilities and a reduction in grant funding. Total expenses increased in 2020, mainly in sewer and water spending. Spending on sewer assets reached nearly $4 million, and water spending reached $3 million.
This chart prepared by MNP shows the Town’s expenses from 2020 and 2019. (MNP/Town of Ladysmith Council Agenda)
Vanderhorst said that the Town was fully cooperative with the audit. There was no evidence of fraud, irregularities, or illegal payments. The audit found that accounting policies used by the Town are appropriate and have been consistently applied.
The audit found that the Town of Ladysmith is in good financial shape. The Town generated a $5.7 million surplus for 2020. That does not mean that the Town has $5.7 million in cash on hand. The surplus reflects reserve budgets and federal COVID-19 funding that has restrictions on how it can be spent.
“What’s happening functionally is when a council budgets for the year and sets the tax rate they budget for a balanced budget,” Vanderhorst said. “But the accounting standards they’re reporting under are not done on a cash basis.”
Budget surpluses are fairly common for B.C. municipalities. Things like capital expenditures, infrastructure spending, debt repayments and transfers into reserves for future costs are all reflected in the surplus.
For example, the Town of Ladysmith has allocated equity to continuing projects, future projects, equipment, solid waste, snow and ice removal, water operating funds and sewer operating funds.
“Most of the surplus that’s there is already earmarked for other things,” Vanderhorst said.
Running a surplus allows municipalities to keep property tax rates steady and allows municipalities to be prepared for contingencies or unexpected costs.
“It’s that type of planning and looking ahead and saying let’s make sure we have some money set aside so we don’t have something unanticipated put us into deficit,” Vanderhorst said.
