Accounting firm says it can’t confirm city’s claim it had $11.2 million surplus in 2017
The City of Charlottetown’s CAO is responding to an audit that shows the city’s finances are not black and white.
Peter Kelly, the city’s chief administrative officer, said while preparing the most recent financial statements, the city’s finance staff identified a number of accounting items that needed to be addressed.
“The city worked with its finance, audit and tendering committee, staff and auditors to adjust the financial statements to further comply with accounting standards for the public sector, as required by the Municipal Government Act,’’ Kelly said Wednesday. “The city will continue its efforts to further its level of compliance with current accounting standards for the public sector.’’
Accountants from MRSB have cast doubt on the City of Charlottetown’s statement that it showed an $11.2 million surplus in its consolidated financial statements for 2017.
Then-finance chairwoman Melissa Hilton said in November of 2018 that the surplus in question was aided by money the city receives from the federal and provincial governments.
The accounting firm was brought in as external auditors to look at the city’s financial statements. However, it couldn’t confirm the value of the surplus the city had reported.
MRSB provided what it called a qualified opinion on the city’s financial documents.
Auditors said there were no observed year-end inventory counts for 2016 or 2017 for either the city or the city’s water and sewer utility.
“We were unable to determine whether adjustments might have been necessary in respect of the net surplus of the year reported in the consolidated statement of operations and the net cash flows from operating activities in the consolidated statement of cash flows,’’ the MRSB audit writes.
The audit doesn’t say how much the figure might have been off or whether the adjustments they talk about could have improved the city’s financial position or made it worse.
The MRSB report also indicates auditors were “unable to satisfy ourselves that tangible capital assets had been properly recognized for the years ended Dec. 31, 2015; Dec. 31, 2016; and Dec. 31, 2017. Since the recognition of tangible capital assets factors into the determination of amortization expense, expenses and amounts recoverable under contribution agreements, we were unable to determine whether adjustments might have been necessary in respect of the net operating surplus for the year (2017) reported in the consolidated statement of operations and tangible capital assets and funding receivable on the consolidated statement of financial position.’’
The $11.2 million figure is listed in the report as annual surplus as opposed to operating surplus.
The accounting firm also identified a number of errors in previous years’ financial statements, such as overstating its pension assets, not recording the decommissioning of the East Royalty lagoon in 2016, a project which added a liability of $455,000, and adding more than $4.7 million in liabilities in 2015 over the closure of the East Royalty landfill site.
The city’s audited financial statements are available at Charlottetown.ca/financials.
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