WHAT is a MUNICIPAL AUDIT

The Turner Valley Rate Payers Board is very pleased to publish this guest contribution on our Blog site. Vicky McGonigle is a lawyer who retired from her family and children’s law practice after 30 years. Vicky served as the Mayor of Turner Valley from 1983 to 1989 and was also recently employed as the Chief Administration Officer of Longview Alberta. We are grateful to her for her efforts in providing this article. Please enjoy Part 1 of this article and watch for Part 2 to be posted soon.

WHAT is a MUNICIPAL AUDIT? 

WHAT DOES a MUNICIPAL AUDIT DO? And

WHAT DOES IT NOT DO?

Vicky McGonigle

April 26, 2019

All of us have heard of the “annual municipal audit” for our respective communities. This audit is required by the Alberta Government under the provisions of the Municipal Government Act and must be accompanied by a “financial reporting form” in a specific format. Both are required to be provided to the Government on or before May 1 in each year. Before that happens, the auditors visit the community over a period of weeks and inspect the financial records of the community.

What are they actually looking for in their examination? Firstly, they are required to ensure that the financial records of the municipality are accurately reported in the books of account of the town as at December 31 of the prior year. They examine records of assets, liabilities, tangible capital assets, non-financial assets, and accumulated surplus or deficit (not to be confused with left over cash! – it is a compilation of a number of entries, some restricted cash, some in less tangible items).

There are four components to the financial statements. These are well described for you at the Alberta Government Municipal Affairs website in a searchable document titled “Quick Guide to Municipal Financial Statements”. In summary, the financial statements provide the ratepayer with a description of the sources of revenue, and the allocation and use of economic resources by your council and administration.

The audit will also check to ensure that the expenditures by administration are supported by resolutions or by-laws of council. Administration can neither collect nor spend monies without approval of council. This approval usually comes in the budget process, in which council and administration review what they wish to spend in the forthcoming year, and where they wish to get the money (i.e. Taxes, grants, user fees, etc.).

The auditor will also produce a management letter separately from the financial statements. In this management letter they review basic matters, such as whether or not the administration has appropriate checks and balances in place to prevent loss of funds, theft of funds, or spending outside of the budget parameters. Generally this letter is provided to your council on an “in camera” basis.

WHAT DOES the ANNUAL AUDIT NOT DO?

The annual audit 

  • Does not provide for strategic financial planning.
  • Does not assess the efficiency of your municipal workforce.
  • Does not assess the effectiveness of administration in managing or reducing costs.
  • Does not assess the effectiveness of your members of Council.
  • Does not address the engagement of Councillors in supervision of the overarching municipal objectives.
  • Does not assess the effectiveness of communication within your administration, or between administration and council.
  • Does not assess future administrative goals.
  • Does not assess the efficiency of the provision of  municipal services
  • Does not assess the alternative options available to Council for both service delivery and administrative organization.
  • Does not assess whether or not this past years expenditures support the long term strategic plan of the Town for growth, effectiveness, tax rate management, business development, community engagement.
  • Does not address the culture of management in their dealings with the stakeholder members of the public.
  • Does not address the issues of municipal transparency and accountability between council and their constituents.

This is not an exhaustive list, as you can imagine. What I am really saying here is that the annual audit required by the Provincial Government does not replace the hard work of creating a clear strategy for the Town, that is understandable by administration, municipal employees and constituents. Every town must clearly assess, discuss, engage, and communicate “where it wants to go from here and how it wants to get there.”

That is essentially why you have elected a Council and a Mayor.

Does this require an outside “facilitator”? Maybe, but not necessarily.

What it requires is leadership. All of the studies and papers on the organizational assessment of a functioning organization recognize the cardinal rule – Leadership is top down. If you wish your Council to be leaders, your Mayor must lead. If you wish your administration to be “leaders” within the community operations, then your Council and your C.A.O. must be leaders on this, and any important issue.

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