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This article originally ran on the Courier Islander.
So you think you want to run for council? So you think you know enough to understand how a city works? Well sit back and have a big belly full of this.
It came from Brad Piercy of MNP when asked by city council what kind of comparison Campbell River would get with other communities. They had just been perusing the 2013 financial statements which MNP handles for the city.
"If you have a high net asset number, yours is $25 million, usually it means your assets are depreciated down so your total depreciated assets might be at 50 or 60 per cent," said Piercy. "If you go and spend $50 million in additional capital items and finance it by $40 million in the next couple of years then all of a sudden you have Municipal Finance Authority (MFA) debt, your net financial assets instead of being positive they're negative, so the issue about where you stand really comes into play about how much have you really spent towards replacing your capital assets. The more you've done on spending on capital assets the more you have MFA debt, your depreciated value goes from 60 per cent to 90 per cent but then you have net asset deficiency. Really all it is is a balancing act."
Piercy said it so calmly and without really pausing you would think he might have been talking about the weather.
And just when you're trying to figure that one out, Councillor Andy Adams chips in with the following.
"My understanding is that the city of Campbell River is well positioned in being in compliance with the Public Sector Accounting Board (PSAP) albeit not necessarily from the replenishment of the depreciating assets, but from identifying where we sit as where we are in being in compliance with PSAP. Would you say that's a fair statement?" Piercy agreed.
What does it all mean? For the layman it has something to do with the stuff the city owns that's getting old. They have to replace it, but that will take some cash. And they also have to start putting more cash away for the other stuff that's not quite too old now but will be in the future. And the more they can replace without borrowing, the better. Although borrowing isn't that bad if you address your debt promptly.
And when councillor Larry Samson asked Piercy what he thought of the city's long-term debt which sits at $4.8 million after 2013, Piercy was nonplussed.
He said that kind of debt was a drop in a bucket and that there were other municipalities who wished they had the financial statements Campbell River does.
Categories:Assurance ＆ Accounting
Related Topics:Financial Reporting
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