No news is good news, but it pays to be aware of potential bad news.
The 2020 audited financial statements of Tiny Township were presented to council recently, and while overall the municipality was performing quite well, there were some minor concerns regarding trends slowly heading in “the wrong direction.”
Sue Bragg, partner of Baker Tilly SGB LLP, provided a slideshow and overview of the statements. Topics included consolidated statement of operations and of various financial positions, including liabilities and net financial assets.
Throughout the presentation, comparisons were often shown for the provincial average and what is considered to be low risk, as well as where Tiny was situated in each regard. In most of the slides, Tiny ranked healthy and above the areas of risk.
Tangible capital assets (TCA) are the physical components of a working corporation; in the case of a municipality these can include land improvements, buildings, information technology, equipment, infrastructure, and vehicles. TCA are recorded at cost less accumulated amortization (or payment of debt over useful life of the asset).
At the net TCA slide for non-financial assets, Bragg expressed a point of interest within the statements.
“The ratio that we look at there is the asset consumption ratio. If you take the accumulated amortization of the TCA at the end of 2020 divided by the total cost of the TCA,” said Bragg, “this ratio for you is 56.2%. It’s a little bit higher than the low risk of 50%, and it is certainly higher than what the provincial average is (at 39%).
“When we look at how this has been trending, it has definitely been moving very slowly but in the wrong direction,” Bragg added.
Information provided by Baker Tilly stated the asset consumption ratio for 2019 was at 55.5%, the 2018 ratio at 54.9%, the 2017 ratio at 54.8%, and the 2016 ratio at 53.3%.
Bragg offered that the possibility of estimation could be off, but noted when looking at disposals, “it’s pretty rare that we’re disposing of assets and getting more for them than” their amortized cost, and added that it was “definitely something for council to be aware of.”
Deputy Mayor Steffen Walma remarked that a special infrastructure levy had been set up to catch up to capital asset management as it was identified in 2014. Bragg clarified that from a valuation standpoint, assets were valued at the historical cost of purchase price.
“Theoretically, that gap is even larger based on inflation?” Walma asked.
Bragg confirmed the suggestion. “We stick to the numbers that are on the financial statements. But you're quite right, the gap could be bigger than what I’m showing on those slides.”
Another area Bragg stated could be a concern to council was in accumulated surplus. While the majority of the amount was invested in net TCA, unrestricted deficit had grown, and the reserves to reserve fund ratio was considered unfavourable.
“This has been moving slowly in the wrong direction,” stated Bragg. “Last year, it was a deficit of $806,006; this year it’s just under $1,295,200.
“Compared to what the ministry considers low risk at 20%, Tiny is at 30%; so you’re well within what they feel is reasonable, but provincially you are definitely behind. Provincially, that average is about 75%.
“And it begs the question: What could we or should we be doing differently?” posed Bragg.
In positive trends: Tiny did well for cash and cash equivalents at approximately $1.2 million increase in cash over last year; taxes receivable ranked higher than the provincial average but lower than low risk and the neighbouring North Simcoe average; and net financial assets were well above low risk and marginally above the provincial average.
Mayor George Cornell noted that an additional provincial scorecard would be a good tool for additional metrics, and looked forward to receiving that report.
The 2020 audited financial statement from Baker Tilly as well as the overview presentation slides can be found as part of the agenda through the township website.
Archives of council meetings are available to view on Tiny Township’s YouTube channel.
