Lac La Biche County lacks information to accurately report on their financial situation due to major gaps in accounting and bookkeeping throughout the year, according to a report made public by council last week.
“Council has not received a financial report since spring. The deficiencies in the accounts of the County are so significant, that presentation of any financial reports would be misleading,” stated a report prepared by newly-hired Finance Manager Maurice Gushta and released by council Nov. 1.
According to his 11-page report, records weren’t being properly kept and numerous problems had to be addressed — including closing out 2010 accounts, reconciling tax levies, ensuring that funds transferred electronically were being recorded, keeping track of receipts, purchases and invoices.
But according to the report, the bank has not been reconciled since December 2010.
Reconciling the bank means making sure that an organization’s own account statements match its bank statements.
When records are not kept properly, the risk of fraud increases, said Ward 7 Councillor Gail Broadbent, who is also a certified general accountant.
“It’s always a concern and that’s why you want to have all those controls and systems in place so it minimizes the risk,” Broadbent said.
But she stressed that to date, there have been no signs of fraud.
“We have been assured that there are no signs of any misappropriation or fraudulent activities by both the auditors and our new finance manager,” Broadbent said.
“We’ve been strongly assured that there’s been nothing going in that direction. That’s very positive, we were relieved to hear that.”
Mayor Peter Kirylchuk and Broadbent both said that all the problems in the accounts are fixable.
“All of the deficiencies can be rectified,” Kirylchuk said. “I’m confident that all these deficiencies in bookkeeping and accounting can be worked out so that the municipality can move forward.”
But because of these problems, budget planning for the 2012 year will be delayed.
“Without having all of the financial items done, it’s difficult to budget,” Broadbent said.
“We use historical information to assist with the next year’s budget, and right now, that information is not complete.”
But Kirylchuk said the delay won’t be a problem and that he doesn’t think this is unusual.
“In fact it’s a little more relevant because you have a better idea of what your linear assessment is going to be — the figures for the linear assessment don’t come out until the new year,” Kirylchuk said, adding that the budget for 2011 was approved on April 12 this year.
Purchasing problems
Purchase orders were not kept since 2010, the report states. There were also no systems in place to properly code and record invoices, invoices weren’t being returned on time, and because a purchase order system was lacking, it was hard to identify missing invoices, the report states.
“Not all suppliers send statements,” said the report. “Most often missing invoices are identified when a supplier complains about not being paid.”
According to the report, this is being fixed right now.
Over $360,000 paid in audit fees
To close out 2010 accounts, 4,350 adjustments had to be made, stated the report.
This included: recording $15,937,099 of payroll from June 15 of last year when they switched payroll systems; recording $49,801,205 in capital expenditures as fixed assets; reclassifying $16,025,000 in debentures proceeds recorded as revenue as increases in Equity in Fixed Assets.
These transactions have had to been recorded before an audit could be made.
“Because most of the accounting was not complete, the auditors had to spend an incredible amount of effort to complete their audit,” stated the report, highlighting that this caused the audit fee to be over $360,000, about six times the standard rate for municipality this size.
KPMG has been appointed as municipal auditors since Oct. 26, 2010.
Revenue problems
The report also states that taxes have not been levied on three rental properties the County owns. It recommends for all municipal properties to be reviewed before levying taxes next year.
GST rebate claims have not been submitted since March, something that should be done every three months. A payment of $771,267 claimed last June has not been received. Penalties and interest have also not been accounted for.
The County can charge fees to oil and gas companies for drilling a well within its borders. But fees have not been billed out for two years. After missing monthly reports were provided by Municipal Affairs, $586,445 has been billed out for the period of September 2009 to August 2011.
Lack of staff
Kirylchuk, Broadbent and county spokesperson Shadia Amblie all said there wasn’t one particular reason for why records weren’t being kept properly, but a series of indiscrepencies.
“The processes weren’t in place, now we realize that we have to firm up our processes and get everything in order,” Amblie said, adding that there is no single person or department to blame. “We’re not finger-pointing into one department, it’s a number of areas where we identified that we need to make some improvements.”
Kirylchuk says he thinks that lack of key personnel was a major reason behind the problems.
“Some positions were vacant for many months. It’s necessary to have a full compliment of staff in an organization like a municipality, we’re a $50 million a year operation,” Kirylchuk said. “And if you have key positions that are vacant, it just overloads other people and makes it challenging for everyone.”
A finance manager and senior accountant were hired a few months ago. Five management positions are still advertised on the county website, as well as the Assistant Chief Administrative Officer, Planning and Development Officer and Human Resources Consultant. And although his position is not advertised on the website, the county’s CAO Duane Coleman resigned on Oct. 24.
But Kirylchuk says he is happy that two key financial positions have been filled, and that the deficiencies in the accounting can now be addressed.
“I’m very pleased that we have the position of finance manager and the senior account filled with capable people,” he said. “These folks will be bringing the deficiencies into place and we can then go on with the budget and it makes that much easier.”
Kirylchuk said he thinks positions remain vacant because nearby oil and gas industries are able to offer more money and attract employees that may otherwise have come to the county.
“We are in competition with private industry,” he said.
An on-going issue
Problems in accounting have been an on-going issue that was noted before, Broadbent said.
“Council had concerns back from the beginning of when we were elected, we had concerns with the financial reporting,” she said. “It’s been on-going for a while.”
The county’s auditors also brought up concerns of how bookkeeping and accounting has been done at the beginning of the year, she said, adding that council has been addressing the issues by bringing in outside accountants and forming a financial committee (comprised of herself, Ward 5 Councillor MJ Siebold and Ward 6 Councillor Tim Thompson). It was formed after the departure of the previous Chief Financial Officer.
Some issues were also raised in the organizational review completed by Russel Farmer and Associates that came out in July this year.
A majority of staff surveyed for the review said they disagree that the administration is done well and that it’s well managed financially, states the report. County staff also said financial information should be provided in a timely manner to the public.
