The provincial government is threatening to withhold millions of dollars from towns across the province according to briefing notes obtained by The Telegram under access to information laws.
The government told municipalities it won’t pay out the municipal operating grants (MOGs) in April if towns don’t come in line with a new, provincially mandated auditing standard.
However, the system is rife with confusion. Several towns contacted by The Telegram were unaware that they were in non-compliance with the new standards, and others said the new process was too complicated, or too costly to get done on the province’s timetables.
Every municipality in the province is required to submit audited financial statements to the government every year.
In June, the province legislated that towns change from the old cash-based system to a new accrual-based standard en-dorsed by the Public Sector Accounting Board (PSAB).
The new PSAB standard requires municipalities to appraise the value of their assets and account for depreciation in each budget year.
“Any time government threatens to withhold money, it also makes you stand up and take notice,” said Glenn Littlejohn, mayor of Bay Roberts which is in non-compliance with the new standards. “If we lost our gas tax and we lost our MOG, we’re talking close to a half a million dollars in revenue.”
In an Oct. 21, briefing note to incoming Municipal Affairs Minister Kevin O’Brien, there were a total of 160 municipalities who were in non-compliance.
At the time, bureaucrats in the department recommended paying out municipal operating grants to towns in non-compliance because hurricane Igor had hit only a month earlier.
By January, when The Telegram started inquiring, many of those towns had managed to complete their audited financial statements. However, at least 64 municipalities — including St. John’s — are still at risk of losing their municipal operating grant.
For the capital city, that would amount to more than $1 million.
A spokeswoman for Municipal Affairs said that the city hasn’t sent in its 2009 audited statements, but the situation is much more complicated. The city was an early-adopter of the PSAB standards in 2008, and actually lent staff to the provincial government for training sessions in 2009 when the system was mandated provincewide. (For more on the city’s perspective, see related story on page A3)
In Badger, Mayor William Foley was not aware his town was on the list of non-compliant towns, and told the Telegram he needed to check with his town manager.
Bonavista Mayor Betty Fitzgerald was under the impression that her town had sent in the proper audited statements in December. The only explanation she could give is the paperwork is still being processed in the Department of Municipal Affairs.
Many town officials contacted by The Telegram said they realize the new standards need to be brought in, but threatening to withhold operating funds is counterproductive.
“Nobody ever likes to be threatened, and government making threats on municipalities. Nobody ever likes to get a letter saying you’ve got to do this, or you’ve got to comply with that,” Littlejohn said. “But I think in the long run, it will make the jobs of future municipal leaders easier.”
Speaking to The Telegram, O’Brien gave some indication that withholding the operating grants is only an idle threat.
“We hope they get the work done, but we also do recognize the challenges of moving from one base system to another base system,” he said. “We set a deadline, but every deadline is not a hard, drop-down deadline.”
Mayor Bern Hickey of Avondale said the province should be doing more to help.
If the government wanted this, the government’s got all kinds of people sitting in Municipal Affairs, half of them doing nothing anyway,” Hickey said. “Put one of these guys out and come in and they can evaluate the assets.”
jmcleod@thetelegram.com
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