NEW COURSE: ALIGN YOUR FINANCIAL AND ASSET MANAGEMENT PLANS

PLEASE JOIN US FOR THE GFOABC PRE-CONFERENCE COURSE “INTEGRATING ASSET MANAGEMENT INTO YOUR LONG-TERM FINANCIAL PLAN”.

This course was developed with support from the Union of BC Municipalities and in cooperation with Asset Management BC. This workshop will be led by Christopher Paine, CPA, CGA, Principle, FIT Local Government Consultant and the Director of Finance and Asset Management for the District of Oak Bay. The workshop includes two remote pre-conference sessions and culminates in person on May 29 in Whistler.

Local Governments (LG) are the stewards of most of the public infrastructure in Canada1. Our infrastructure funding strategies have a huge impact on sustainable service delivery. Ignoring the longterm impact of current infrastructure decisions will compress the financial burden on future generations. An LG can only avoid the financial implications of infrastructure maintenance and replacement initially. Eventually infrastructure lifecycle costs are incurred. An LG who invests proactively from the beginning of infrastructure lifecycle will reap the benefits.

Take for instance an organization who chooses to set aside funds for the replacement of its assets from year 0. Such an organization can offset required tax funding by upwards of 60% by leveraging investment returns.

This example uses a conservate return on investment assumption: 2%. Now consider the possibilities if and organization invests in one of the Municipal Finance Authority’s higher yielding funds such as the mortgage fund currently yielding nearly 6%2. Proactive funding also promotes intergenerational funding equity and helps to mitigate the impact of inflation.

This course demonstrates how a CFO can align their LG’s Asset Management financial realities with its current Financial Plan in seven simple Modules:

(1) Introduction,

(2) Data Collection,

(3) Core Calculations,

(4) Modelling,

(5) Developing Funding Options,

(6) Sensitivity Analysis, and

(7) Communicating Findings.

The course materials include:

(1) a manual,

(2) course exercises,

(3) a Long Term Financial Plan for Asset Management Template, and other materials.

Asset Management, you can’t run from it anymore, so come join our workshop!

1 It is widely cited that Local Governments own more than 60% of public infrastructure (Infrastructure Canada and Federation of Canadian Municipalities for instance.

2 Published Yields February 23, 2023 by Municipal Finance Authority.

CHRIS PAINE , CPA, CGA is the Principal of FIT Local Government Consulting with over 15 years of local government experience in finance and is currently serving as the Chief Financial Officer for the District of Oak Bay. Christopher has earned his Professional Certificate in Infrastructure Financial Management through the Institute of Public Works Engineering Australasia and has led the development of several infrastructure replacement funding plans. He has received Awards of Excellence from the Union of BC Municipalities, GFOA US & Canada, and GFOABC for his work with the City of Colwood’s Sustainable Infrastructure Replacement Plan.

ALLISON IS THE DIRECTOR OF SUSTAINABILITY AT THE MUNICIPAL FINANCE AUTHORITY OF BC (MFA).

ALLISON’S BACKGROUND MARRIES THE SUBJECT MATTER AND CONTEXT EXPERTISE OF CLIMATE CHANGE AND LOCAL GOVERNMENT WITH A CPA’S COMPETENCY IN AUDIT AND ACCOUNTING SYSTEMS AND PROCESSES.

ALLISON IS LEADING MFA’S DEVELOPMENT OF MEANINGFUL AND CREDIBLE ESG REPORTING TO ITS MULTIPLE STAKEHOLDERS.

I certainly feel I’ve hit the trifecta becoming MFA’s new Director of Sustainability at this tipping point moment for ESG performance standards and integrated reporting frameworks. Originally a CPA who worked in audit and accounting for over 10 years, I pivoted to work in the municipal climate and sustainability space across Canada. I began as a ‘senior environmental planner’ at the City of Victoria in 2009, when climate and sustainability were new functions in local government. The portfolio was emergent and ill-defined and there was little precedence or resources for the municipal context. My few peers in other cities were usually urban planners or environmental specialists, and my CPA background was often seen as incongruent.

I thought my audit and accounting training prepared me well to:

• Establish a strong internal control environment for assessing existing processes and making continuous improvements through evaluation and monitoring.

• Apply GAAP’s requirements for the provenance and presentation of information by ensuring it is complete, accurate, reliable, relevant and objective.

WHERE ARE WE NOW?

Despite the best of intentions and many pledged commitments, progress on climate action and sustainable development is relatively flat and certainly not at the scale or pace of what is required. Driven historically by a policy response from governments to UN global frameworks and calls to action on climate, biodiversity, Indigenous rights, and the SDG’s, we are now seeing movement to meet the demands of the global capital market for:

• integration and alignment of standards, practices and actors, and

• integrity in reporting of progress and impact towards these commitments.

WHY NOW, AND WHAT MIGHT THIS LOOK LIKE IN THE MUNICIPAL CONTEXT?

The financial, natural, and human costs arising from the global public health pandemic, significant flooding and wildfire claims and insured losses, as well as the impact to human health and loss of life resulting from unprecedented heat domes, atmospheric rivers, etc. are no longer hypothetical and future projected. Vulnerability and exposure to infrastructure, people, and property is present and material today. IBC losses

Municipal finance professionals are stepping into the climate and sustainability realm to establish or integrate climate and sustainability processes within their organizations through asset management, emergency preparedness, and land use planning. Existing accounting rules require disclosure of probable and estimated contingent liabilities (physical or legal) as well as asset write-downs for damaged or stranded assets.

Municipal TCFD resources and examples

Investors are demanding more holistic performance reporting so they can perform risk assessment of an enterprise to ensure alignment of their values and commitments (i.e. net zero targets). Integrated, sustainability and ESG performance reporting has historically been voluntary, inconsistently applied and nonuniform, leading many to question its quality and integrity. A rapid consolidation of global standards and frameworks, through standard-setting bodies for sustainability and climate disclosures, has taken place over the last year. As of June 2023, the International Sustainability Standards Board (ISSB) will publish their final standards for general sustainability and climate-related reporting, to take effect beginning in fiscal year 2024 within those jurisdictions that adopt the standards. ISSB exposure draft standards continued on page 10 continued from page 9

This latter trend doesn’t just impact large cities like Vancouver and Toronto who issue their own municipal bonds; the demand for ESG reporting from investors and rating agencies has the potential to impact MFA’s access to capital and low cost borrowing available to every local government in BC.

My Work At Mfa

When not getting to know MFA’s staff and members over my first two months, I’ve been feverishly reading up on ESG trends and emerging standards for the financial sector to better understand the evolving expectations of MFA’s investors for relevant, material, and decision-useful disclosures on:

• the impact of MFA’s activities on the environment and society (along MFA’s value chain),

• the impact of sustainability and climate-related risks and opportunities on MFA’s value and performance (MFA’s value creation).

While MFA’s direct carbon footprint is very small, our core business activities (lending and investing) have significant and material impacts on greenhouse gases and climate resilience and living within the planetary thresholds of these vital capitals.

To satisfy the emerging expectations of credit rating agencies, bondholders, institutional investors and asset managers, MFA will collect and report meaningful information on the material activities (and use of loan proceeds) by local governments. We will take an integrated, systems-based approach by leveraging existing reporting on critical infrastructure, asset management, general financial statistics and climate action and risk assessments reported by our members to the Provincial and Federal government.

Like asset management, ESG is a process, not an outcome or a report, which will evolve and strengthen over time. I look forward to working with you all to advance our collective capacity for implementing various aspects of the ISSB’s climate and sustainability reporting standards.