Region Audit Committee, Councillor Baty comment

BY VOICE STAFF

Following our coverage of the accounting firm KPMG’s presentation last week at a special Pelham Town Council meeting, in which the firm offered a summary of its audits of Town finances, the Voice requested comment from Region Audit Committee members (including Mayor Dave Augustyn), and Regional Councillor Brian Baty.

We received replies from the following Councillors, and Regional Chair Alan Caslin.

Mayor Dave Augustyn

Despite ongoing allegations, KPMG’s presentation last week confirmed that there is no unreported debt, that the parkland over-dedication was done correctly, and that the financial statements are correct. Further, the new Treasurer confirmed that the Town is well-within its debt-repayment limit, even when including approved yet not taken out debt of $9.9 million. Finally, when completed shortly, I understand that KPMG’s report will include answers to other questions posed directly by the public.

Chair Alan Caslin

I was away when last Wednesday’s meeting took place, but I was concerned that there was no time for any questions for the Pelham residents there. And though they said that they’d answered all the residents’ questions, I’m not sure that that is true, based on the comments that were printed afterwards.

My job as Regional Chair is to try and keep Niagara together—to try and keep all the puppies in the box, and make sure that everybody gets the transparency that’s required of the communities, while operating with the Region as a whole, with 12 towns and cities. The only way that it can really happen, and we can work well, is when there is transparency, and there is full disclosure, particularly from municipality to municipality, from the Region to the Town.

In this particular case, the Region’s Audit Committee has asked for very specific information, and it just doesn’t seem to be forthcoming. I’m not sure why.

I hope that Pelham does in the end provide the information that the community is asking for, and that the Region is asking for through the Audit Committee.

I find it strange that some councillors have jumped to conclusions that this is over, when quite frankly none of the questions have been answered yet.

The community is still very concerned, and I’m still getting a significant number of emails daily from Pelham residents—more than from any other community, more than any other issue in the three years that I’ve been Regional Chair.

That said, I did reach out to Councillor Peter Papp, who I knew from before I was in politics, to do with the YMCA board, and who is somebody who I trust—I trust his judgement. He’s the one that alluded to other information that may be there. I let him know that I was there for him, and that if he needed any help with anything I would be more than happy to step in. He felt that at the time that the November 29 presentation was going to clear things up. I’m not sure that it has, and hopefully I get to talk with Peter before this goes too much farther.

One of KPMG’s slides shows that in 2008 there was a positive reserve of about four million dollars, just going off the top of my head, to a negative thirteen million in 2016. That’s a $17 million dollar swing, which is concerning to a lot of Pelham residents. It’s a small community—and when you think of the debt per capita, a lot of them are concerned about that.

What I’m trying to do is to get them the information through the Audit Committee and get it out to the community, on just exactly where they’re at. And then hopefully the leadership of the Town can then decide whether they want to move forward with any further debt, or what the plan is to alleviate some of the current debt. It all seems to be a little bit concealed at the moment. The Town will be best off, and I know Peter Papp agrees, releasing whatever information it has to the community.

It’s a little concerning when you can’t answer a question of yes or no to finances from a taxpayer. You have to be able to do that.

I’m sticking with it right to the very end, and I’ll do whatever I can to help.

Councillor David Barrick

As per the Standard article, Pelham has been cleared of what exactly? That headline alone is reckless and not representative of reality. Dave’s friends at the Standard are part of his ‘Penn & Teller’ act.

The audit has done anything to clear Pelham—it has revealed, at minimum, the worst financial management in Niagara, possibly the province. With a Provincial financial advisor coming in, debt approval far beyond the legal limit, moderate to high financial risks identified by the auditor, irresponsible DC credit, parkland dedication and land deals, I’d say the audit has validated many of the community’s concerns.

Not allowing questions to be asked by the public and the continuous inconsistencies of messaging by the Town, including validated claims that the info presented is not the same as that delivered on September 5, and the Town’s claim that the 338page response was supposed to have been all the answers, do nothing to instill confidence in Town Hall.

In fact, I’d say they have lost the public’s trust completely.

What took so long for them to start answering questions directly? Why aren’t they sharing the September 5th audit that should already be public? What else are they hiding from the public?

It’s all very concerning, lots more questions to come, the Region’s Audit committee is not done its work and the Region is still waiting to see the September 5 audit as requested by the full Council.

Councillor Brian Baty

At the outset, I commend the Mayor and Council for taking my advice on the venue of last Wednesdays meeting. The lighting, sound conditions, and seating were appropriate as the capacity crowd gathered.

Secondly, despite uncertainties and potential hostilities, the citizens responded in a polite and respectful manner; as a community we should celebrate this civility. The size of the turnout plus the online streaming audience provides ample proof that concerns are not limited to a small group of individuals or cynics.

It is my hope that that this presentation is the start of a dialogue which could lead to full disclosure and a rebuilding of trust and respect amongst all parties.

There was a lot of detailed information presented and reflection may lead to more questions. I commend the words attributed to Councillor Papp at the end of the evening for providing deeper insight into events.

Questions that have arisen need to be considered. For example, how did $17 million dollars in September now become $9.9 million dollars?

The multi-year graph showing debt levels ending at an 11 percent level falling from a high of 23 percent leads to a question: did that graph assume no new debt and no new projects over that time period, or is the multi-year capital budget forecast superimposed on the data?

Given the drain on reserves, should there not be an analysis to determine the risk potential of such a drain on reserves?

Lastly, can we get a clear statement on the tax impact over time and what, if any, opportunities exist for new projects for potential councillors and mayoralty candidates in the 2018 election?

Councillor Sandy Annunizata

The only thing “confusing and garbled” is the Mayor’s insistence that everything is rosy in Pelham. And adding to that confusion is the misleading headline of the Standard. The audit has not “cleared” Pelham. The finances of the Town are not in good shape and are not in good hands.

If they were, the reserves wouldn’t be empty, we wouldn’t see warning flags on five out of seven financial indicators, and a Municipal Advisor would not be on the way. I have no idea why this Mayor and council find it so difficult to tell the truth; former Councillor Junkin got it right, the Town is in financial trouble and they need some help.

Councillor Tony Quirk

The KPMG presentation regarding Pelham’s finances on Wednesday night further emphasized the concerns that have been raised by the Region in its capacity as a creditor to the Town of Pelham.

And it raised new questions and issues, specifically:

The finances of the Town of Pelham are evidently in such dire straits that the Ministry is recommending an Advisor be consulted. They normally are called in when two indicators are moderate or high, the Town of Pelham has seven. And these numbers are two years out of date.   This confirms my personal concerns about their debt level and is proof that the Annual Repayment Limit is not enough to rely on anymore. In the future,  we need to see these indicators before approving debt and the mitigation strategies to deal with them.

The presentation also confirmed my worst fears, that the Town of Pelham has been raiding its own reserves, contrary to Public Service Accounting Board recommendations but also that they have booked future revenue for Parkland dedication fees as a current year expense artificially increasing their bottom line. If you look at this transaction in detail, you see it has amalgamated two separate transaction (the land purchase for debt) with the creation of artificial revenue in exchange for a future accounts receivable). They borrowed the money twice, in other words, once from their reserves, and once from bank).

Finally, the Treasurer of the Town of Pelham confirmed that the Town of Pelham does not follow best practices with respect to policies regarding financial management. The list of lacking policies is pretty critical.

I think, as creditors to the Town of Pelham, the Region should be requesting a deeper financial audit, especially as the Municipal Act makes all debenture debts of the lower tier our responsibility.

The Town admitted they need $7.8 million in new borrowing to replenish their operating reservesand a further $9.9 million for future borrowing. That equates to over $17 million in debt—$7.8 million that the Treasurer confirmed was taken from reserves.

But my biggest concern is the fact that the auditor confirmed that the CAO of the Town identified land that was needed for Parkland to a developer so they could purchase it, because the Town didnt have enough money, only to pay five times the value two years later.

I am not sure that this sort of collusion is ethical, but it certainly isn’t smart.

The next steps will be for the Audit Committee to meet on January 29, 2018 to receive other correspondence and deal with the unanswered questions that still exist after last Wednesday’s presentation.

I know that Pelham residents are trying to enact section 9(1) of the Municipal Affairs Act, which can ask the Ministry to approve a forensic audit upon receipt of 50 signatures of taxpayers. I think they will exceed that number of petitioners.  We may also wish to wait until the Minister responds.

 

Updated to include late comment by Mayor Dave Augustyn.

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