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Auditor gives Barnwell high marks

Posted on April 25, 2018 by Taber Times

By Greg Price
Taber Times

The Village of Barnwell looks to be in good shape when compared to other areas of the province with a similar population base.

James Nakashima of Avail CPA was on hand at Barnwell’s April 19 meeting to present the village’s audited financial statements as of Dec. 31, 2017.

Nakashima also gave a report card of sorts in comparisons to other municipalities, with Barnwell showing favourable results in numerous benchmarks.

“If you’ve ever heard of ratios for businesses, these are ratios for municipalities,” said Nakashima at the start of his presentation of comparables. “We’ve done this report for the last year or two and we compared the Village of Barnwell with other villages in Alberta and other municipalities with similar population sizes. It’s taking a look at how you are doing compared to your peers.”

The comparable data has only been compiled up to 2016, as Nakashima acknowledged the data is slightly dated being one year behind.

A sustainability indicator compares the village’s assets to its liabilities.

“A higher number will tend to be better because it means you have more assets compared to liabilities. You’ve gone from six in 2013, all the way up to 17 (heading into) 2017. That means your assets are 17 times more than your liabilities,” said Nakashima. “Comparables are all hovering around that seven or eight level. So Barnwell is much stronger on that list.”

For financial assets to liabilities, it takes capital assets out of the equation. It looks at cash and receivables compared to liabilities. Barnwell clocked in at 2.64, with higher numbers being favourable.

“That number can go up and down a little bit depending on cash position,” said Nakashima. “Comparables are all around that 1.6, 1.7 level, so again, the Village of Barnwell is much stronger.”

The last sustainability indicator Nakashima highlighted was operating expenses to taxable assessment.

“In this we are really looking for the trend in changes to expenses compared to changes in taxable assessment. If your expenses are going up faster than your assessment, you are overspending. It has been fairly flat for Barnwell over the years, with a little bit of a spike over the last couple of years —nothing major. It’s gone from 1.38 to 1.66, there’s been a .28 per cent change over the five years,” said Nakashima. “It is still much lower than your peers. In this case, a lower number is better.”

There were also comparables for flexibility within a municipality which includes public debt charges to revenues.
It is how much a municipality spends to service its debt on interest and principal. If you are spending more of your revenue to service debt, it leaves fewer funds to do other things.

“As you have paid down your debt, that number has come down. We are at .03 from .17 and the average is .07/.08. The lower the number the better, it means you are spending less money to service debt,” said Nakashima.

Amortization comes into play with net book value to cost of capital assets. It gives an estimate to a municipality of how much of its capital assets have been used up. If the number is lower, it means you have taken more amortization to capital assets which would suggest they are older and in need of replacement sooner.

“The Village of Barnwell is at around .68 which means in theory that you have around 68 per cent of useful life left in your assets. The peer group is hovering around the .57, .58. anything over .5 is probably pretty solid.”

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