A $350,000 Sleight of Hand (Or I'm so mad I could piss nickles !)

At the Dec 18/06 finance meeting I eagerly anticipated the answer to a question from Coun. Cunningham of how much excess was expected to be available in the Police Reserve at year end that had come from the 2006 operations. (Remember, this should be the difference between what was budgeted for in 2006 and what was spent - the difference to go into reserve). I was amazed when I heard the answer from the Finance manager that there was very little left and the explanation was that the previous finance manager had made a 5 year plan amendment adjustment just prior to leaving.

He was right. On July 24, 2006 Council had voted on bylaw 2039 "A bylaw to amend the 'Financial Plan' for the years 2006-2010. (In point of fact there were changes only made for the 2006 year.) In this bylaw the councillors were given the backup documentation which to this day has never been posted on the City's website. The net effect is a list of 12 items that were changed and effect the financial plan for 2006. Most were done correctly as they identified capital projects that would be deferred (such as 25th ave.) , new Provincial grants for cycling, various new expenditures and how they would be funded etc.

However, Item 7 was "RCMP contract cost reduction of $400,000, with $350,000 being set aside in reserve and $50,000 being used to fund Council approved new analyst position. "

I remember sitting at this meeting and thinking that the Council was using $50,000 of the anticipated 2006 surplus for an RCMP analyst position and the balance would go into the RCMP Reserve. (All done in an open and transparent way with a registered vote.)

BOY WAS I WRONG ! What the Finance Manager was doing with his last bylaw was actually changing the original budgeted amount for the RCMP contract downwards by $350,000 and allowing the monies to flow into general reserves or used for other originally unbudgeted expenditures. No wonder there was no excess when Coun. Cunningham asked the question on December 18, 2006.

Think of it this way. You have $10,000 for your yearly house budget and you tell your wife that you will budget $8000 for the bathroom renovation and $2000 for golf clubs and you post this on the fridge door. Halfway through the year you realize that you have finished the bathroom for only $4000 and decide to treat yourself by going out and buying a $6000 set of golf clubs. Instead of telling your wife you simply rehash the budget and repost it as $4000 for bathroom renovation and $6000 for golf clubs and replace on fridge door. (By the time she notices, you will have done something else more stupid to piss her off and this incident will pass quite quickly !)

Now when the City's financial statements for 2006 are produced as well as future 5 year financial plans the amended "budget" will be used and you look like a great prognosticator as the variances are small and explainable.

I would like to think that the Council was thinking what I was thinking at the time and this minor bookkeeping sleight of hand was accomplished only because of the item's wording. I choose to believe that this council would only take money from the Police Reserve after an open debate and vote.

As a matter of fact there was another resolution debated and voted on earlier in this meeting;
"Moved by Councillor Cochrane, seconded by Councillor Gilroy:THAT Council support the recommendation from the Finance Committee for the establishment of a Restorative Justice Program at an annual cost of $44,820.00, to be funded from the unused R.C.M.P. contract costs. CARRIED, with Councillor Beardsell opposed."

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As a Reminder to Council and staff the link below explain why financial plans are amended from time to time:
Gov B.C. Financial Plan Lawful expenditure authority: The financial plan provides the expenditure authority for the local government. Expenditures may not be incurred unless they are provided for in the financial plan for the current year.
Emergencies: The only exception to the rule that expenditures may only be made if they are in the financial plan is when expenditures are required to deal with an "emergency" situation. In this case, expenditures should be made as demanded by the situation. The financial plan must then be amended as soon as possible afterwards to reflect the expenditures and funding sources for the expenditures.