Dollars & Sense P e r s p e c ti v e
Issue #117 • december 2021
Next Level Finance Making Nature Count MFA DMAC Fund
p r es i d e nt ’ s m es s ag e in this issue President’s Message 2 Executive Director’s Message 4 Next Level Finance 5 Membership Renewal 6–7 Preparing for the Cyber Insurance Challenges Ahead 8 Collectors’ Corner 9 Making Nature Count 10 How to Improve IT Project Success with One Calculation 12 MFA’s Corner 15 Extreme Weather Events: Impact on the Assessment Roll 18 Land Owner Transparency Registry – An Initiative to End Hidden Ownership of Land in BC 20 Quarterly Question 21 Integrating Climate Considerations into an Asset Management Program 22 Thank You Exhibitors 23 Thank You Sponsors 24
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t’s been quite a year. I don’t think anyone could have predicted that we would have to deal with not just one, but three states of emergency: a pandemic, followed by devastating fires, and most recently unprecedented flooding. I’ve said that we are a resilient group but expect that many of you are feeling stretched far beyond your limits. On behalf of GFOABC Board members and staff, I want to express my heartfelt gratitude to colleagues across the province who continue to go above and beyond by providing exceptional support to residents, businesses and property owners as our communities deal with these unprecedented challenges. In spite of all of this, our regular work continues. Although many of us are already juggling 2022 budget discussions while still navigating 2021 workloads, December can
Board of Directors President Lorraine Coughlin Vice President Nyla Attiana Secretary-Treasurer Rianna Lachance Past President Trevor Thompson
provide an opportunity to pause and reflect. GFOABC has spent considerable time this past year reviewing and reflecting on our revenue sources, external risks and how we plan to best serve our members. The result is a carefully considered twoyear phase-in of an increase to membership fees, beginning in 2022. The increase will ensure that as we move forward, the association is resourced to meet the services that our members require and to continue to be the leading source for knowledge-sharing, promoting excellence in leadership and providing professional development that adapts to the ever-evolving role of local government finance officers. 2021 saw the association not only maintain a high level of service to our members but continue to
Directors at Large Julia Aspinall Jim Bauer Jeannie Bradburne Shelley Hahn Kathy Humphrey Lenora Lee Talitha Soldera
Staff Kala Harris, Executive Director Gerilee McBride, Graphic Design
e x e c uti v e d i r e c t o r ’ s m es s ag e
invest in new ways that we can be better together. Our new virtual environment enabled expanded professional development opportunities to support the changes relating to the new Home Owner Grant program, the implementation of the new Asset Retirement Obligations standard and the development of a more robust online forum (to name a few), all while still providing our regular programming to our members. Underpinning all of this is the strong working relationships that we have with our provincial and association partners which are instrumental in supporting local governments as we continue to navigate the pandemic. Behind the scenes, new staffing is also being put in place to ensure that the association continues to be resilient and that we can maintain this high level of service in the future. And while there is no shortage of work or challenges ahead, I encourage everyone to take the opportunity to reflect on the accomplishments that you were able to achieve in what have been two very difficult years. As finance officers, we don’t do this enough and
it’s important that we pause, give thanks and recognition to ourselves and all of the amazing colleagues we have across the province for the work we do and the support we provide to each other along the way. On behalf of the Board, I want to say a heartfelt thank you to Kala and her team for their tremendous work this past year. I would also like to thank the Board and committee members for their dedication and commitment to GFOABC. And last, but definitely not least, thank you to our members for your support and participation throughout the year. As always, if you have any comments or suggestions on what you’d like to see from your association, please feel free to reach out to any Board or staff member. We’d love to hear from you! Best wishes this holiday season. Lorraine Coughlin, GFOABC President
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e x e c uti v e d i r e c t o r ’ s m es s ag e A
lmost two years into a “new normal”, learning how to live, work and play amidst a global pandemic is becoming arguably NORMAL. Last year at this time, we were looking forward to the rollout of the Covid19 vaccine and an eventual return to a “pre-pandemic normal” as visions of in-person workshops and conferences danced in our heads. Fast forward one year and we find ourselves anxiously awaiting a third shot in the arm and dreaming longingly of a “post-pandemic normal” as we take a collective deep breath to ready ourselves for the next wave of the virus. This past year, despite not being able to be in-person for any of our training and events, we saw increased participation and engagement in our programming. Registration in the Annual Conference remained strong, the Asset Retirement Obligations 4-Part Workshop Series more than surpassed the forecasted registrations, the Collectors’ Forum continued to reach new heights of attendance and this year included the biennial CPABC Local Government Accounting & Auditing Workshop— all contributing to the increase. GFOABC is a strong community of members, sponsor partners and subject matter experts. It is the dedication, fellowship, and support of this community that is the strength of the association; without this community, what we accomplished this year—or any year for that matter—is simply not possible—THANK YOU! While these are still very precarious times in terms of the pandemic, we find ourselves growing steadier in the face of each successive wave and decidedly more excited about the promise of a new year—FINGERS CROSSED!
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With that said, as we look out to the new year, leadership will be an overarching theme. The annual conference, NEXT LEVEL FINANCE: Leadership & Transformation, will explore key issues impacting local governments and the leadership role that finance plays in navigating the ongoing challenges of the pandemic and devasting climate events of the past year. How is local government finance transforming and leading process innovation, collaborating across departments and organizations, and supporting their teams in these times? We hope you will join us at the conference for these important conversations. Leadership at all levels has never been more important. Over the past year, we have been developing a Leadership Competency Framework for local government finance professionals that outlines the competencies needed to demonstrate excellence in local government service delivery. This framework has been developed with input from local government members across BC, is aligned with GFOABC’s Vision, Mission and Values, and will underpin the development of a reimaged Strategic Financial Leadership Program. We look forward to sharing more information about this framework in the new year. Lastly, on behalf of the membership, I would like to express my sincere appreciation and gratitude to the Board of Directors and Committee Members for their ongoing commitment, leadership, and guidance in building a strong and sustainable association. Best wishes to everyone for a safe, happy, and healthy holiday season! Kala Harris, Excutive Director
DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 5
Membership
renewal
renew & pay online To Do: • Members hip renewa l begins Jan uary 1st • Pay by January 3 1st
thank you for your continued support. office@GFOABC.CA 250.382.6871
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Membership
renewal
Thank you for your continued support GFOABC membership puts you in a league with a group of finance professionals throughout North America who are dedicated to: • Promoting the use of efficient financial management systems in a local government setting. • Developing individual knowledge and skills. • Promoting the development of accounting, budgeting and financial reporting procedures in cooperation with the GFOA of the United States and Canada, CPABC, the Public Sector Accounting Board, and similar organizations. • Providing a forum for discussing and analyzing financial problems relevant to British Columbia and other issues of concern to public finance professionals.
GFOABC’s Focus
Education Provide high quality education, training and professional development programs by anticipating the needs of local government, proactively scanning the environment, responding to new legislative or other changes and continuously evaluating local government needs related to financial issues. Communications To inform, protect and connect our membership by using leading edge technology to support quality service delivery and effective decision making. External Relationships To increase the cooperation with operational and representative organizations that GFOABC works with or provides services to, to increase the effectiveness of GFOABC.
GFOABC Member Classifications Organizational Membership: GFOABC members are employed in a financial capacity in municipal, regional district or related government organizations. From accounting clerks to Chief Financial Officers, their roles include a combination of administration and financial management.
Affiliate: GFOABC also has an Affiliate classification that is generally comprised from sectors closely involved with local government finance, including, bankers, lawyers, consultants, software suppliers and more.
What are the benefits of being a GFOABC member? • Member discounts on training, the annual conference, job postings and advertisements. • Access to the secure online Forum. • Members only website access to MemberLINK. • Monthly updates & quarterly newsletters. • Earn continuing professional development hours by participating in GFOABC activities, such as committees, working groups, facilitating a workshop and much more. • Complimentary registration to all GFOABC webinar forums – NEW! • Access to our Temporary Support Program for short-term staffing solutions – NEW!
Your Organization’s Membership Renewal The designated primary contact for each organization will receive a renewal notice via email from GFOABC. The primary contact will be responsible for confirming the organization’s named members and will receive the renewal invoice once renewed. The invoice may be paid with credit card online, or by cheque in the mail.
Affiliate Membership Renewal You will receive a renewal invoice via email from GFOABC. The invoice may be paid with credit card online, or by cheque in the mail. Please contact GFOABC with all your membership inquiries at office@gfoabc.ca or 250.382.6871.
DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 7
Preparing for the Cyber Insurance Challenges Ahead
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yber criminals are stalking Canadian local governments. A few years ago, this trend was concentrated in the east. Since then, cyber attack activity has migrated west. In 2020 criminals misappropriated $700,000 in funds from Prince George by diverting monies intended for City contractors. In 2021 the Resort Municipality of Whistler (RMOW) was victim of a ransomware attack. While the RMOW did not make any payment or engage in dialogue with the cybercriminals, it was a lot of work to restore services and rebuild their network and systems. Cyber criminals favour local governments, as they perceive weakness in their cyber defences compared to other targets. Moreover, cyber criminals believe that cities and towns may be more willing to pay ransoms than other organizations because of the amount of personal information they hold. Personal information is a broad category that includes employee records, property tax information, incident reports and similar forms of information. To combat this threat, local governments have taken a multi-faceted approach to mitigating their cyber risks. These defences include strengthening their IT security and employee education. As not all attacks are preventable, robust cyber insurance coverage has become an essential tool to help manage the risk. Unfortunately, we are in a hardening cyber insurance market and obtaining coverage has become increasingly difficult. As cyber incidents escalate in both frequency and severity, insurers have responded by increasing rates, restricting capacity and implementing greater underwriting controls. Many insurance companies are moving away altogether from providing cyber insurance to public entities. Those insurers that are still providing coverage to public entities now require that baseline internal controls be in place prior to offering coverage. It used to be that implementing cyber risk mitigation measures was a way to reduce premiums. Now, cyber risk mitigation measures need to be in place just to obtain coverage. 8 | GFOABC.CA
Local governments looking to purchase cyber insurance for the first time or looking to renew their existing cyber policy must show that specific levels of cyber security have already been implemented within their organization. Such steps are a minimum prerequisite to obtaining cyber coverage. Examples of these minimums are set out below. CYBER-SECURITY TRAINING Employees can be the biggest risk factor for cyber attacks and everyone plays a role in managing cyber risks and preventing cyber breaches. Implementing a training program or taking advantage of a training service is a critical way to prevent cyber criminals from stealing from your organization or compromising your IT infrastructure. MULTI-FACTOR AUTHENTICATION Multi-factor authentication (MFA) immediately increases your account security by requiring multiple forms of verification to prove your identity when signing into an application. MFA should be implemented on all critical business applications, such as email and privileged user accounts. By proactively implementing these two cyber controls you are ensuring you are well on your way to being a cyber-secure organization. You are also ensuring that you will be able to obtain critical insurance protection that is essential in today’s heightened cyber risk landscape.
NICOLE PURVES is the Deputy Director of Insurance at the MIABC. Nicole has worked in the insurance industry for 25 years, primarily involved in claims handling, specializing in casualty claims. For more information on programs and services the MIABC offers to help its members mitigate cyber risk contact askusanything@ miabc.org.
c o l le c t o r s ’ c o r n e r “i’ll see you in court!”
I
recall when a taxpayer who refused to pay the penalty said to me “I’ll see you in court!” and walked out. My first reaction – panic – I better get a lawyer! But wait, Saanich has a municipal lawyer. First of all he assured me that a municipal employee, including the collector, cannot be sued because of being indemnified by the municipality. The taxpayer would have to sue the municipality. Then we discussed the specific circumstances. I felt a lot better! “Bring it on!” One of the many responsibilities we have as municipal tax collectors is to enforce the legislation regarding property taxation. On the surface, reading and applying the legislation may seem quite straight forward. Over the years there have been relatively few court cases which required that the legislation be clarified as to its application. However, on occasion the courts have resolved questions as to how certain legislation applies. Here are a few of them: • Catalyst Paper Corp v Port Alberni, Campbell River, Powell River, North Cowichan (2012) – issues: ability to pay, benefits received – clarified the authority of council to set tax rates. • Younger/Taylor v District of Taylor (2006) – issue: the duty to impose a penalty. The judge stated “The
legislation does not afford the municipality or collector any discretion in relation to penalty. There is no exception to the clear rule that the collector must impose a penalty on amounts outstanding after the due date.” • Rivtow Straits Ltd v Prince Rupert (1981) – clarified when the due date ends, that is at the end of the day (11:59 p.m.) • Gray v Langley Twp (1986) – clarified tax sale “manifest error”. The judge also stated “Where the result of the tax sale process is the loss of the property by the owner, any ambiguity should be resolved in favour of the land owner.” • Montreal (City) v Montreal Port Authority (2010) – clarified that the Crown must use municipal tax rates. • Halifax (Regional Municipality) v Canada (PW & Gov’t Services) (2012) – clarified that the Crown must use valid valuations. (Also Nav Canada Inc v Assessors of Areas 01, 15, 17 & 21) • McQuarrie Bros Motors Ltd v Campbell River (2018) – clarification regarding tax sale Notification. • Prince George (City) v Columbus Hotel Company (2011) – clarified who the “owner” is during the tax sale redemption period. • Maple Ridge (2020) – Declaration that their tax sale was invalid. • Eurig Estate v Attorney General of Ontario (1998) – clarified that the
amount of a fee must not exceed the cost of providing the service for which the fee is charged. • Westwood Congregation of Jehovah’s Witnesses v Coquitlam (2006) – issue: application for permissive tax exemption clarified that procedural fairness is required for a permissive tax exemption application. Based on these and other court cases, we have clarity how to apply the legislation. Also, last year due to COVID, the collectors had several discussions with the Ministry of Municipal Affairs and municipal solicitors regarding the interpretation of the basic property tax legislation we’ve be using all these years without question. This all helps us do our job better. So the next time a taxpayer said “I’ll see you in court.” I said “No problem” and went for a coffee break.
DOUG STEIN has worked in municipal finance for over 30 years. In 2011 he retired from his position as Manager of Revenue Services for the District of Saanich. Doug leads the Collectors’ Forum, is a GFOABC Life Member, and a CPA, CMA.
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Making Nature Count
“W
ith aging infrastructure and mounting financial pressures brought on by climate change, we literally can’t afford not to put climate and our natural assets at the centre of how we plan and measure the success of our municipalities.” As the Chief Financial Officer for the City of Rossland, B.C., Michael Kennedy spends a lot of time thinking about how the organization can better conceptualize, account for and manage natural assets such as wetlands, forests and riparian areas to reduce risk, liability, and improve service delivery. “We’ve started inventorying our natural assets to get a sense of what we own, what we rely on, and to deliver core services like drinking water and stormwater management and will continue to make progress,” says Kennedy. The catch, though, is a Public Sector Accounting Board (PSAB) prohibition that prevents organizations such as his from considering natural assets as tangible capital assets. It is one of the reasons Kennedy joined a record number of attendees at a November PSAB discussion group meeting, as well as a follow-up discussion at this year’s Local Government Accounting & Auditing Workshop—a joint professional development event presented in partnership with the Chartered Professional Accountants of BC (CPABC) and the Government Finance Officers Association of BC (GFOABC). In the virtual PSAB meeting, presenters and observers encouraged PSAB to allow public sector entities to reflect the monetary value of natural assets in their financial statements. The discussion group came to the consensus that PSAB should develop a formal project on natural assets guidance. “Natural assets - such as wetlands, forests, streams - provide many core services to public sector entities such as local governments and their citizens,” said Roy Brooke, Executive Director, Municipal Natural Assets Initiative (MNAI). “These services range from filtering drinking water to managing stormwater. But currently, local governments cannot account for those natural assets or their services in their budgets or annual reports and by not doing so, they’re effectively putting a zero value on nature.” As an example, a wetland or aquifer could provide the same functions as a water treatment plant, but “if public sector entities are only able to record the water treatment plant as an asset on their Statement of Financial Position, they have less accountability to maintain the wetland or aquifer,” said Bailey Church, Partner, Accounting Advisory Services, KPMG. This limitation has contributed to the mismanagement of natural assets and the deterioration of the services they provide. In addition to providing core municipal services, natural assets play key roles in recreational, health and aesthetic amenities, biodiversity, and are 10 | GFOABC.CA
Stormwater management in Oshawa, Ontario. MNAI’s project findings show that natural assets along this segment of the Creek currently provide a stormwater management value of $18.9 million.
instrumental in adapting to climate change by building climate resilience and reducing greenhouse gas emissions (often termed naturebased solutions). Natural assets contribute all these services and solutions that contribute enormously to the economy but is not properly reflected. The discussion group encouraged PSAB to require local governments to disclose financial and other information about natural assets, which means local governments would need to understand how reliant they are on natural assets and their services, the risks those assets face, and the potential exposure of the local government to future costs. This knowledge will help local governments make informed decisions about how to best manage and budget for both engineered and natural assets. This shift in perspective and approach that recognizes we cannot
Stormwater management in Whistler, B.C.
separate core decision-making from the natural world would be consistent with all global policy discussion, as expressed by many reports including the Dasguta Review, the IPBES, the World Economic Forum, the Living and Non-living Resources, and many others. “The private sector has funds available to invest in natural capital but there is currently no consistent way of measuring the return on investment as natural assets are not routinely valued,” said Joanna Eyquem, Managing Director, ClimateResilient Infrastructure, Intact Centre on Climate Adaptation at the University of Waterloo. Luckily that is changing as more and more local governments in Canada, like the City of Rossland, are starting to account for natural assets in a meaningful way. MNAI’s work with nearly 100 local governments to-date has been developing standards, methodologies and tools to measure, value and account for natural assets and their services.
Now is a key opportunity in Canada for accountants to also play a role in recognizing the value of natural assets and supporting long-term management of the services they provide to our communities. The PSAB discussion group meeting was a follow-up to its consultation paper earlier in the year where the Intact Centre on Climate Adaptation, KPMG, and MNAI coordinated a response with nearly 70 signatories representing Canada’s financial sector, most of Canada’s major cities, professional associations, asset management groups, consultancies, think tanks, research centres, river basin authorities, and NGOs. For more background, to read the response letter, or to get involved, please visit PSAB consultation response. At the City of Rossland, Michael Kennedy continues to actively pursue a means to account for natural assets and other climate-related externalities. “It represents arguably both the biggest opportunity and threat to professional accountants,” said Kennedy. “One of the major challenges we face is lacking basic accounting standards on something so fundamental. We’ll find work-arounds but there is no question this prohibition is an impediment to considering the true value of services from nature.”
ROY BROOKE, Executive Director, Municipal Natural Assets Initiative served as Director of Sustainability for the City of Victoria between 2011-2013. Between 2003-2011 he worked for the United Nations, including the World Health Organization, United Nations Environment Programme and UN Office for the Coordination of Humanitarian Affairs. During his time with the UN he was based in Geneva, Switzerland, and later in Rwanda, where he was UNEP’s Environment Programme Coordinator. Prior to this he served as a political advisor to Canada’s environment minister.
JOANNA EYQUEM, Managing Director, Climate Resilient Infrastructure at Intact Centre on Climate Adaptation, is engaging the financial sector in considering natural capital and physical climate risk in investment decisions. Prior to joining the Intact Centre, Joanna was the National Climate Change Practice Lead at AECOM in Canada. She is a Professional Geoscientist (P.Geo.), Chartered Water and Environmental Manager (CWEM) and Chartered Environmentalist (CEnv.)
BAILEY CHURCH, Partner, Accounting Advisory Services Leader, KPMG, leads the National Public Sector Accounting Advisory service line at KPMG. Bailey is a well-known speaker at seminars and conferences across the country, including the Government Financial Officers Association, the Institute of Internal Auditors, the Financial Management Institute, the Canadian Comprehensive Auditing Foundation, and the Office of the Auditor General. DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 11
How to Improve IT Project Success with One Calculation
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nformation Technology projects are some of the most complex and high-profile that you will encounter in your professional life as a finance department team member. Perhaps you have read about the trouble of the new Phoenix payroll system being implemented by the Canadian public service. Maybe you have direct experience with severely compromised IT investments where you work. There is no shortage of examples. So, what can finance do to help? In October of 2016, the Auditor General of British Columbia made some suggestions when they released their report “Getting IT Right: Achieving Value from government information technology investments.” THE REPORT IN 60 SECONDS Regardless of your industry, it is a valuable read for accountants and we recommend reading the full report. In case you don’t have time, here is a quick summary of the major points: • IT is important because “every aspect of government depends on IT.”
WHAT ABOUT “VALUE”? The report uses the word “value” 57 times with no explicit definition. The only comment on how to achieve it is to assess: • alignment of the project with the organization’s specific needs, priorities and strategies • contribution to the organization’s desired outcomes • cost • the level of risk While these are good points, they provide no particular direction to those attempting to assess the possible value of a project or measure the success of a project during implementation or after completion. ROI TO ASSESS VALUE BEFORE & AFTER Perhaps it is just that we believe that numbers are the key to all universal truth (no really, we do), but we argue that finance should calculate the proposed and achieved value for IT projects. The accountant in us is likely very comfortable with Return on Investment (ROI) calculations:
• Only 29% of IT projects globally are rated “successful.” • Success defined as: • On Time • On Budget • AND Value • Success depends on: • People • Planning • Consultation and • Governance The report is an absorbing read, but it fails to elaborate on a significant element: What is “Value” and how do you calculate it?
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This type of calculation should be used to determine the optimal use of your organization’s investment. But our experience is that these calculations are rarely utilized when considering IT solutions, particularly in the public sector. • Why? There are at least two problems with the word “Profit” in the context of Public Sector IT projects. Public Sector organizations typically do not think in terms of profit. • Even if you work outside of the public sector, you may reasonably ask, “How does an ERP system (for example) generate profit for any organization?”
Thus, profit (and therefore ROI) seems like a nonstarter. But with a minor change in terminology - replace “profit” with “calculable benefit” - the concept retains its applicability to the public sector. The “calculable” part is important; you don’t want this exercise to dissolve into imprecise speculation about intangible benefits. Those may also warrant a discussion, but you should not give up the important quantitative analysis. You should focus on those aspects to which you can assign a real dollar value. There are two broad categories of calculable benefit that you should consider: Efficiency of Staff Resources Your staff spends their entire working lives involved with IT systems. A more efficient, convenient and highly automated solution will help them do their work faster, more reliably and with less cross-checking and manual review required. If you estimate the hours saved that a new IT system might enable and multiply it by your staff’s hourly cost, you can measure the economic impact of those time savings. Reduction or Avoidance of Direct Expenses There are many direct expenses which a new IT system can help to reduce or eliminate. You pay fees to an external accountant - would it reduce fees if you automated a significant portion of the work they performed? What if your new system could help to avoid late payment of invoices and thereby reduce your late fees and penalties to vendors? Perhaps a new system would provide a reduction of ongoing annual maintenance and support costs?
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An Example Consider the scenario where your current ERP system is no longer supported. You determine that the risk level of continuing with an unsupported system is unacceptable. You have identified three possible solutions and are working through the selection process. You have seen demonstrations and received fee estimates. You have contacted references and determined they each have strengths and weaknesses. Continued next page. DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 13
Clearly, there are many considerations (some of which are intangible). But don’t underestimate the value of performing an ROI calculation. • Calculable Benefit: How much money will we save with each solution? For example, estimate the following separately for each solution: > Hours of staff time saved by reduced data processing. > Hours of staff time saved by automating report creation. > Estimated late payment fees to vendors avoided due to improved A/P processing abilities. > Decreased finance costs due to accelerated AR collections. • Cost: What is the cost of each solution including all features/modules etc. necessary to facilitate the above benefits over a 5 or 10 year period.
THREE ADVANTAGES OF THIS APPROACH 1. Forces Detailed Assessment: All too often we see clients that have only a general understanding of how a particular system will help them. Vendors often don’t do anything to help except provide marketing doubletalk; “Work Smart”, “Improve Productivity” or “Improve Efficiency”. These aspirational comments are great, but you need measurable results. 2. Easy Comparison of Alternatives: You can immediately begin to see some interesting relationships between the options that were hard to see at first: > Solution 3 is four times as expensive as Solution 1, but it provides 4.5 times the value. If all else is equal and the organization can find the $100,000 budget, Solution 3 is the better choice for your organization. > Solution 2, while more expensive than Solution 1, it does not provide a commensurate increase in benefit. Thus, if the budget does not allow for $100,000 investment, the next best option is Solution 1. 14 | GFOABC.CA
3. Clear Monitoring of Performance: Another advantage of this approach is that your team has very specific, measurable goals to monitor the project and assess success. For example, you estimated a calculable benefit value based on specific time savings in report creation and data entry. These time savings should be measured to see if you got the benefit. Moreover, if your vendor is confident in their abilities to deliver these time savings, you can attempt to include attainment of the advantages into the contract. The AG-BC included in her report this clear statement of the importance of measuring value:
“IT-enabled projects aren’t just about technology – they involve substantial changes to an organization’s culture, business processes and customers. These projects are really IT-enabled business change. A successful project improves services and allows for more effective use of taxpayer money. And, their success or failure is about more than just being on time and on budget, it’s also about achieving expected value.” –CAROL BELLRINGER, FCPA, FCA AUDITOR GENERAL The ROI calculation is an important tool that finance department staff should use to estimate, measure and demonstrate the value of their IT project.
JAMIE BLACK is President of F.H. Black & Company Incorporated. For the last 25 years, he has consulted and trained finance officers, auditors & accountants in government, higher education, and corporations throughout Canada and the U.S. His work focuses on increasing finance department efficiency and effectiveness through the implementation of technology and improved business processes.
m fa ’ s c o r n e r MFA’s Diversified Multi-asset Class Fund
T
he Municipal Finance Authority of BC’s (“MFA”) long-awaited Diversified Multi-Asset Class Fund (“DMAC” or the “Fund”) is expected to launch in mid-January 2022. This article provides our members with some details on this new investment option – the first of its kind for BC local governments. The Fund will offer BC’s local governments a broadly diversified investment option to prudently grow reserves not needed for 10 years or longer. Before highlighting some key characteristics of the Fund, please make note of the next GFOABC Investors’ Forum Webinar on December 14th. This educational session will meet one of the requirements to enter the Fund: the finance officer responsible for financial administration (Section 149 of the Community Charter or Section 237 of The Local Government Act) must attend an educational/informational session on the DMAC. We urge any other local government finance employee who is interested to join as well. Phillips, Hager & North will manage the new Fund according to investment beliefs and policies vetted and approved by a team of local government investment professionals and MFA’s trustees. Central to those guiding principles is the notion of managing the Fund with a long-term view, with the aim of exceeding the core inflation rate by 3.5% annually, while minimizing expected volatility. The target global portfolio will include allocations to fixed income, equities and alternative strategies - such as direct real estate investments. The Fund will be highly diversified, both geographically and by asset class/management style, to optimize forward-looking expected risk-adjusted returns.
The Fund will align with a shared focus among BC’s local governments on ESG and climate change considerations. All components of the Fund will be managed under the UN’s Principles for Responsible Investing and incorporate broad ESG considerations into the investment process. DMAC will be a “Low Carbon” Fund with a significant portion (expected to be over 40%) of the asset classes employing a strict Fossil Fuel Free (FFF) screen. The DMAC will incorporate as many FFF investing approaches as prudent, where employing such strategies would not be expected to materially detract from expected risk-adjusted returns. While achieving a higher portfolio-level FFF composition was desired, options were limited as several of the asset classes and strategies are not currently available in a FFF format. However, the vast majority of assets held within the investing categories over which we do not employ a strict FFF screen can in fact also be defined as FFF investments. For example, with the exception of the Canadian Equities strategy, we would expect a maximum of 10% of the assets held within each of the non-FFF strategies below to be invested in securities of FFF companies. The screen employed is the same one that is employed in our FFF Short Term Bond Fund and screens out securities of companies “directly involved in the extraction, processing and transportation of coal, oil and natural gas.” Finally, the Infrastructure component being contemplated to be added in mid-2022 would be focused on renewable energy-related investments (such as wind farms, for example). The targeted allocation of investments to the various strategies employed within the Fund will be as follows: Continued next page.
DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 15
Suitability of the Fund and a positive member investment experience will be key concerns for the MFA as it onboards interested local governments. The Fund will not be suitable for all local governments. Members will need to carefully determine whether long-term investment in the DMAC Fund is appropriate for their own circumstances. The MFA is available to discuss key considerations local government investors and their Councils/Boards should understand prior to investing in the Fund. Of primary importance will be the designation of reserves as suitable for long-term investment, a process that first begins with long-term cash flow/ reserve analysis. Once reserves have been identified as long-term in nature, this will need to be acknowledged as such by a Council or Board. We foresee selling the Fund prematurely or during a market correction and thereby crystalizing paper losses – as among the biggest risks to a successful investment experience for local governments. In order to minimize the risk of selling early, but also to accommodate asset classes, such as Alternatives, that cannot be quickly liquidated, investors in the Fund need to plan for the possibility of not being able to redeem funds quickly during unexpected circumstances, ahead of the targeted 10 year investment
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horizon. Under the vast majority of circumstances, we expect requests for redemptions will be honoured within a month. However, a lockup period for redemption requests of up to 3 years is a possibility under extreme scenarios. Undertaking a thorough and transparent process, which may require updating your existing Council or Board-approved Investment Policy and understanding the accounting impacts of the Fund on your financial statements, are some of the critical steps local governments will need to undertake prior to investing in the Fund. While it is necessary for a local government to be aware of the total amount of funds not needed within the next 10 years or longer, that figure may not necessarily be the amount of money that may be invested in the DMAC. A local government’s maximum exposure to the Fund will be either 10% or 25% of their last year’s reported Cash & Investments total. Those percentages are based on a local government’s population – those with populations over 10,000 may invest up to 25% of their total Cash & Investments, otherwise a maximum of 10% applies. Second to this, of the Total Allowable Amount, up to a maximum of 25% may be ‘derived’ from (or ‘to the credit of’) Restricted or Deferred Revenue reserves. These limits are illustrated in the calculation sheet below.
If a Local Government is invested in the Fund and that investment appreciates to an amount greater than their calculated investment limit, the local government may not contribute any additional funds to the DMAC. However, they will not be required to bring themselves into compliance by withdrawing funds from the DMAC. MFA and PH&N are available to discuss the new Diversified Multi-Asset Class Fund with you and/or your Council/Board and they have a variety of materials to
assist in policy development or communications. As a starting point, please feel free to contact us to gain a better understanding of the Fund, investment limitations and the processes we are suggesting. Lastly, again, we encourage interested and curious parties to join us and PH&N for an educational session on the DMAC on December 14th. MFA looks forward to continuing to play a leading role in assisting BC’s local governments manage their investment needs.
PETER URBANC has 30 years of experience in global banking and the public sector, having worked as an investment banker, treasurer and executive officer. From 1990 to 2009, he was an investment banker working with leading international banks with a specialty focus on the debt capital markets. In 2009, Peter joined the Province of Nova Scotia’s Department of Finance as Executive Director and Treasurer. He also served as a Director of the Nova Scotia Pension Services Corporation and Trustee of both the Nova Scotia Teachers’ Pension Plan and the Nova Scotia Public Service Long Term Disability Plan Trust. In January 2016, Peter took on the role of Chief Executive Officer at the Municipal Finance Authority of British Columbia. He holds a Bachelor of Commerce degree from McGill University and an MBA from the J.L. Kellogg School of Management.
DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 17
Extreme Weather Events: Impact on the Assessment Roll
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e understand that 2021 has been a difficult year for British Columbians affected by recent weather events (e.g. flooding, landslides and wildfires), and you may have questions or concerns about the impact on your community’s 2022 Assessment Roll. The following is an overview of the legislative framework that BC Assessment follows when contemplating the impact of weather events on assessments. You are welcome and encouraged to share this information on your community’s website. WHEN IS DAMAGE OR LOSS REFLECTED IN PROPERTY ASSESSMENTS? Per Sections 18(2) and (3) of the Assessment Act, substantial property damage or destruction that is reported, and not repaired by October 31, 2021, will be considered when determining 2022 property assessments. WHEN IS DAMAGE OR LOSS NOT REFLECTED IN PROPERTY ASSESSMENT? Substantial damage or destruction of buildings and/ or structures that occurred between November 1 and December 31, 2021, and was not repaired by December 31, will not be reflected in 2022 property assessments. Section 10(3)(c.1) of the Assessment Act provides a framework for amending assessments in such cases.
WHAT CONSTITUTES SUBSTANTIAL DAMAGE? Buildings and/or structures are considered substantially damaged if remediation costs are at least 25% of assessed improvement value, or the damage renders the improvements uninhabitable or unusable for their intended purpose.
WHAT IF BUILDINGS AND/OR STRUCTURES ARE UNDAMAGED, BUT LAND IS DAMAGED? Section 10(3)(c.1) only permits amendment to an assessment if a property’s buildings and/or structures were deemed substantially damaged or destroyed. Damage to land without substantial building and/or structure damage will not be considered until the following year’s assessment.
HOW IS BC ASSESSMENT RESPONDING TO THE RECENT WEATHER EVENTS? We recently implemented an Extreme Weather Response Team (EWRT) comprised of dedicated appraisal resources to ensure coordinated, consistent, effective and efficient communications, inquiry response and valuation amendment decision-making for properties impacted by recent weather events.
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HELP IDENTIFY SUBSTANTIALLY DAMAGED OR DESTROYED BUILDINGS AND/OR STRUCTURES IN YOUR COMMUNITY BC Assessment uses mapping and emergency service notifications to identify areas and properties potentially affected by weather events. The following additional information is critical to ensuring 2022 property assessments are fair and accurate: • Property owner self-reporting of damage/loss details, including repair costs and pictures; • Community damage assessments; and • Building permit information. The foregoing information can be provided to our EWRT via email at weather@bcassessment.ca or phone at 1-866-valueBC (825-8322) local 00500. Please encourage property owners with substantially damaged or destroyed buildings and/or structures, which were not repaired by December 31, to contact us before January 31, 2022 to share details on the damage or loss. More information on the impact of extreme weather events, including property owner damage declaration forms can be found at www.bcassessment.ca/weather. To help facilitate assistance to impacted property owners within your community, please add this link to your community’s website.
BC Assessment’s Manager, Local Government Relations, MICHAEL SPATHARAKIS has worked as an accredited appraiser and assessor (Appraisal Institute of Canada) for over 16 years. He holds a Bachelors of Arts (VIU), a Certificate in Real Property Valuation (UBC), a Certificate in Local Government Administration (CapU), and a Masters in Public Administration (UVic).
James Hobson, CFA First Vice-President Investment Advisor Portfolio Manager
Charet Chahal, CFA First Vice-President Investment Advisor Portfolio Manager www.hobsonchahal.com 1 (800) 665-MUNI (6863) DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 19
Land Owner Transparency Registry – An Initiative to End Hidden Ownership of Land in BC
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he Land Owner Transparency Registry is a publicly searchable registry of information about beneficial ownership of land in BC. Beneficial land owners are people who own or control land indirectly, such as through a corporation, partnership or trust. The registry is intended to end hidden ownership of land in BC. The Expert Panel on Money Laundering in BC Real Estate reported that this beneficial ownership registry is the single most important measure to combat money laundering. The Land Owner Transparency Act was passed in 2019. Since then, any transfer of title triggers a disclosure into the registry. By November 30, 2022 all corporations that currently own land, or individuals who own land through a trust or partnership, must disclose information in the registry. While local governments are excluded from filing a transparency report, there are over 300,000 known entities that must disclose information. Those who do not file risk large penalties for non-compliance. The Surveyor of Taxes (Rural Property Tax) is including a short message about the registry in their tax notices. Similarly, BC Assessment is including a short “call-out box” in their 2022 Property Assessment. Please see an example below. The Ministry of Finance is asking if local governments would be willing to include a short message in their 2022 property tax notices. Spreading awareness of the registry will increase compliance, which can decrease money laundering in real estate and ultimately support housing affordability. “Action required - If you own land for the benefit of a corporation, a trust or legal partnership, you must check if you need to file with the Land Owner Transparency Registry. More info at landtransparency.ca.”
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Please email me at Matthew.ParkerHall@gov.bc.ca if you are interested and/or would like to learn more about this initiative.
MATTHEW PARKER HALL is a Senior Policy and Legislation Analyst with Property Taxation Branch, Ministry of Finance. He is currently focussed on supporting the Enforcement Officer of the Land OwnerTransparency Act.
CIVICINFOBC CIVICINFOBC
q u a rte r ly q u estio n
ev charging stations
I
n the September issue, we asked local governments about EV charging stations. Specifically, do you have them and what do you charge? The survey yielded results from 26% of BC local governments. Of the local governments that responded, nearly 70% currently operate EV charging stations and an additional 16% plan to add this feature within a year.
Fees charged for Level 2 chargers varied amongst local governments:
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quarterly question The administration of the EV stations varied significantly among local governments. Some local governments charge fees directly, some others receive net revenues and some rent space to providers. The most common providers of EV charging services by respondents were Flo by Fortis and ChargePoint. Local governments reported fees charged: Flo charges local government 15% of fees collected, while fees for maintenance of the infrastructure varied between local governments. ChargePoint charges local government 10% of fees collected, while fees for maintenance of the infrastructure varied between local governments. There were other providers with shared revenue models mentioned, each by one local government. These providers were AddEnergie, Chargelab and MoTi. And, of the local governments who rent space only to companies for installed chargers, reported relationships with BC Hydro and Tesla.
THE NEXT QUARTERLY QUESTION: FINANCIA L SOFTWARE SOLUTIONS APLEASE USE THIS LINK TO BE A PART OF THE RESULTS OF THE NEXT QUARTERLY QUESTION. YOUR PEERS WILL THANK YOU! The survey should only take about 3–5 minutes to complete. The responses to this question will be profiled in the next GFOABC Newsletter. If you have a topic for a future quarterly question, please contact the office at office@gfoabc.ca or (250) 382-6871
If you would like to learn more about this free service, contact CivicInfoBC at info@civicinfo.bc.ca
DECEMBER 2021 • DOLLARS & SENSE PERSPECTIVE | 21
Integrating Climate Considerations into an Asset Management Program
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limate change adaptation has become a core pillar underpinning infrastructure resiliency. Precipitation changes, increased temperatures, higher winds, and other climate change induced conditions pose substantial risk to infrastructure and the public services that depend on them. Even more, the costs associated with the damage and disruption of infrastructure caused by climate change are projected to be massive. Given the existing infrastructure deficit already faced by municipalities today, the effects of climate change on public infrastructure will exacerbate the deficit even deeper. This whitepaper explores how municipalities can begin planning for climate change impacts on their infrastructure systems by integrating climate considerations into their asset management programs.
Integrating Climate Considerations into an Asset Management Program
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