GFOABC Dollars & Sense - June 2020 - Issue 111

Dollars & Sense P e r s p e c ti v e

Issue #111 • june 2020

Yes, and‌Community & Economic Development The Remote Finance Team Anything Worth Doing Is Worth Doing Right

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 Thank You! 6 Collectors’ Corner 7 MFA’s Corner 8 Yes, and...Community and Economic Development 10 The Remote Finance Team 12 Cyper and Social Engineering Attacks 14 Anything Worth Doing Is Worth Doing Right 16 Economic Outlook Q2 18 Quarterly Question 22 Thank You Exhibitors 23

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There is so much uncertainty in the world right now. One’s health, the economy, education and the impact on communities are just a few of the unknowns that exist today. In the early days of the pandemic, the words, “be kind” did not resonate with me. We’re Canadian and live on the West Coast, do we need to be told to be kind?

With COVID-19, it became clear that there would be no physical conference in June. As Genelle described at the Virtual Conference, “Canceling the conference was not an option”.

Kala was tasked with transforming the regular conference format to a virtual one, with very little time. Kala, you did an amazing job!

Kala undoubtedly would share those accolades with the board, staff, technical support, volunteers, sponsors and you, the members. I believe leadership matters, intentions matter, best efforts matter and results matter.

However, we are often judged by our results. Great results are very difficult to consistently achieve without a strong team and supports. Thank you Kala and all those involved for delivering on all fronts.

Why was it so important to have a conference? GFOABC exists to serve our members, which is especially needed at this time. This is a time when current information, updates, connections, awareness of what others are doing to cope with COVID19 and a bit of a mental break are needed. When we look at the focus areas of our Strategic Plan, the conference checks all the boxes: • To be relevant to members • To be a center for member, government, and partner dialogue • To provide value to our members through partnerships GFOABC is on a great trajectory, based on feedback from members.

There will be opportunities and new pressures that will require adjustments to implementation plans and education offerings. We will continue to adapt to better serve our members and our communities.

One of the benefits of the virtual conference is that the sessions are available for viewing at any time.

This allows material to be watched, even paused and discussed with your staff. The attendees this year, due to the online format and the pricing

2020–2021 board of directors structure, included many first time attendees. We welcome feedback and encourage everyone to explore what GFOABC has to offer.

I look forward to serving you as President of GFOABC. We are all fortunate to be well served by talented staff and a dedicated board as well as an environment and sector that embraces partnerships and collaboration. As odd as it sounds, I am already looking forward to the 2021 conference when we can reconnect, share experiences and have a few laughs. We are “Better Together” and can help one another through these uncertain times. I encourage you to reach out to your colleagues in other communities both directly and through GFOA. Trevor Thompson President

Board of Directors President Trevor Thompson Vice President Lorraine Coughlin Secretary-Treasurer Nyla Attiana Past President Genelle Davidson Directors at Large Jim Bauer Jeannie Bradburne Shelley Hahn Rianna Lachance Lenora Lee Jennifer Lockhart Michelle Mason Talitha Soldera

Members-at-Large Julia Aspinall, City of Vancouver Komal Basatia, City of Abbotsford John Kurvink, Regional District of Okanagan Similkameen Elio Iorio, District of North Vancouver Mario Piroddi, BDO Staff Kala Harris, Executive Director Kisha Pellerin, Manager, Operations and Member Services Gerilee McBride, Graphic Design

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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 There is no denying that a lot of work goes into planning a conference. The venue is booked three years out, the theme is decided a year and a half out, and topic selection begins a year out. By the time March rolls around, three months out from the conference, the final agenda is ready to be announced. At this point eighty percent of the conference work plan is complete.

This year planning progressed much like it had in previous years.

The March newsletter, including the final conference agenda, was scheduled to be sent out on March 16.

Even while the newsletter was being prepped in February, it was becoming increasingly clear that the conference might not happen. So, while the conference agenda was being announced we were discussing our conference options, cancel the conference outright or virtualize it.

By April 6, with the Board’s approval, the virtual conference was announced and work began in earnest to undertake the monumental task of transforming the in-person event into a virtual event. Once speakers, sponsors, and exhibitors were on board we set out to secure audio-visual support and confirm the conference platform. By the time everyone was lined up we had a little over three weeks to pull everything together.

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I can’t lie, there were a few sleepless nights in the lead up to the conference, but there was never any doubt about our intention. While we know that there is no substitute for catching up with friends in-person at the welcome reception and networking with colleagues in between conference sessions, we wanted to try as hard as possible to ensure that members could enjoy something as close to a full conference experience as possible.

Based on the feedback we received during the conference and following, it’s safe to say, that our inaugural virtual conference was a huge success. A big thank you to the Board for their guidance, my colleague, Kisha Pellerin, for handling the mammoth task of registration and coordinating the conference app, and AspectBC, EventMobi, and Shawn Lam Video for ensuring that everything ran pretty seamlessly even when there was a glitch or two.

And, a big THANK YOU to the more than 450 delegates, speakers, sponsors, and exhibitors who joined us on this journey. This conference simply would not have been a success without your participation.

Kala Harris Executive Director

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T h a n k yo u !

Thank you to our members who volunteered their time to help us deliver our programming, to provide input to our various working groups, and to participate in our COVID19 dialogues over the past year. This is your Association without you our work would simply not be possible.

Wayne Anderson, City of Merritt Julia Aspinall, City of Vancouver Nyla Attiana, District of Tofino Kevin Bertles, City of Armstrong Sally Bhullar-Gill, City of Surrey Christie Bidwell, City of Surrey Corinne Bomben, City of Prince Rupert Tracy Bowen, Cowichan Valley Regional District Jeannie Bradburne, Nanaimo Regional District Angela Brain, City of Delta Chris Calder, Regional District of Fraser-Fort George Angela Campbell, City of Penticton Nelson Chan, Capital Regional District Kathy Chen, Town of Sidney Phoebe Cheng, City of Vancouver Diana Christenson, Town of View Royal Ken Christian (Mayor), City of Kamloops Kris Dalio, City of Prince George Rick Danyluk, District of North Vancouver Genelle Davidson, City of Kelowna Cara Dawson, City of Kamloops Sambo Eam, Capital Regional District Shelly Edwards, City of Coquitlam Myriah Foort, Cowichan Valley Regional District Clive Freundlich, City of Comox Tanya Garost, District of Lake Country Carolyn Gillis, Regional District of Kootenay-Boundary Isabel Gordon, District of West Vancouver Matt Green, City of Victoria Kerry Hall, City of Colwood Elma Hamming, City of Rossland Jennifer Hepting, City of Colwood David Hrycan, City of Kelowna Lydia Jones, City of Abbotsford 6 | GFOABC.CA

David Joy, City of Fort St. John Michael Kevany, City of Surrey Pamela Kuiper, City of Kelowna John Kurvink, Regional District Okanagan Similkameen Adam Langenmaier, City of Powell River Debra Law, City of Vernon Emily Lewis, City of Abbotsford Jennifer Lockhart, City of Victoria Dave McKague, Metro Vancouver Patti Meyer, City of Kamloops Geoffrey Mooney, City of Burnaby Catherine Nolan, City of Maple Ridge Mike O’Reilly (Councillor), City of Kamloops Charlotte Osborne, City of Cranbrook Chris Paine, District of Oak Bay Ashley Palmer, City of Abbotsford Tina Perreault, Sunshine Coast Regional District Jodi Pierce, Columbia Shuswap Regional District Aaron Price, City of Surrey Marilyn Rilkoff, Regional District of Central Okanagan Rachel Runte, City of Surrey Shelley Ryan, City of Coquitlam Linda Sabatini, Metro Vancouver Angie Schumacher, City of Kelowna Karen Sharp, Village of Radium Hot Springs Lyle Smith, City of Peachland Talitha Soldera, Cowichan Valley Regional District Kathleen Soltis, City of Prince George Allison Swanson, District of Metchosin Sheila Thiessen, City of Merritt Trevor Thompson, City of Maple Ridge Dina Trujillo, City of Surrey Natalie Wehner, Cowichan Valley Regional District Farouk Zaba, City of Port Coquitlam

c o l le c t o r s ’ c o r n e r 2020 conference collectors’ forum session About 50 finance officers attended the Collectors’ Forum session at the virtual annual GFOA Conference. The session was facilitated by Doug Stein, GFOA facilitator. The guest speakers were Kally Khaira and Treana Clarke, Annual Property Tax, MOF; Duncan Jillings, Tax Policy, MOF; Joshua Craig, Local Government Finance, MAH; Don Lidstone, Lidstone & Associates; and Clive Freundlich, Director of Finance, Town of Comox.

Kally and Treana provided an update on the Property Tax Deferment Program. The implementation of centralizing the deferment program has gone well, however there are issues with taxpayers trying to contact the Deferment Office by phone. Municipalities have experienced a significant decrease in workload. Thanks to the working group for their participation in this project. It was noted that any arrears/delinquent taxes must be paid and that only the net taxes can be deferred – not the Home Owner Grant amount or current year’s fees/ charges that are included on the tax notice which is each municipality’s responsibility to collect.

Kally then spoke on the Home Owner Grant Centralization Project to be implemented in 2021. With the cooperation of GFOA, a working

group will be set up. Stay tuned with the Collectors’ Forum.

Duncan, Joshua, Don and Clive discussed the provision in the Community Charter for alternative tax collection schemes (ATCS) and due dates – the experience of the Town of Comox, the legislation and the Province’s guidance. 86% of the attendees have implemented an ATCS (a bylaw is required) and 38% feel that they will experience cash flow problems. Customer service and collection procedures will be impacted with many municipal halls closed to the public and many now considering accepting credit card payments for taxes. It was noted that the “due date(s)” have not been changed – just the date(s) when the penalty will be applied to unpaid taxes (as at the respective penalty date). Also, even though remittance of school taxes collected may be delayed until December 31, municipalities must still report monthly starting August 1 (fifth business day of each month) and report a nil/zero payment amount. Payment dates to other agencies has not changed (whether or not collected). The legislation has been changed to allow municipalities to borrow from their reserve funds (including capital reserves) and this is encouraged before approaching MFA.

Finishing off the session, there was discussion regarding this year’s tax sale. 71% of the attendees are considering deferring the 2020 tax sale.

It was noted however that deferring the tax sale may cause additional problems in 2021 and may be just delaying the inevitable. The Ministry would like to know what policies and procedures you have in place to protect vulnerable individuals from threat of tax sale? Beyond the requirements of legislation, do you take action when it appears that an individual property owner may not understand or be able to respond to notification of unpaid taxes and the risk of tax sale? Please contact Joshua at Joshua.Craig@gov.bc.ca.

Thank you to the GFOA for sponsoring the Collectors’ Form session at the Conference and the quarterly Collectors’ Forum webinar. The next Collectors’ Forum webinar will be July 22, 2020. •

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. JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 7

M fa ’ s c o r n e r covid-19 financial focus Like many of you, we made rapid changes to ensure the health of our team and organization over the past two months. The MFA has been working very hard on behalf of our clients to provide financial stability by ensuring uninterrupted access to financing and focussed support on creating high-quality, diversified, and liquid investment portfolios. We have been actively planning and securing our own sources of funding, fielding numerous calls about suitable investments, and working closely with the Province of BC on new measures being implemented for BC local governments.

Long-term Infrastructure Lending We are very pleased to announce that all three ratings agencies affirmed MFA’s AAA bond rating in May. In an environment of significant fiscal stress felt by all layers of governments, those credit ratings help ensure favourable interest rates and market access going forward. In March, the MFA was the first public entity in Canada to successfully issue a fully publicly-offered security since the significant market correction earlier this year. This meant we could fund our normal spring round of infrastructure borrowing for clients as planned, without delays or reduction in funding levels. Note that for our fall borrowing round, regional districts must have submitted applications for Certificate(s) of Approval on Security Issuing (SI) bylaws to the Ministry of Municipal Affairs and Housing by August 10, 2020. Municipal Security Issuing Resolutions (MSIR) must be provided to your Regional District prior to this deadline.

Revenue Anticipation Loans As you know, you are now able to carry forward Revenue Anticipation borrowing into next year, and the MFA is

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surveying and gathering information as to potential borrowing needs to plan for funding. Many local governments may require financing to bridge potential delays in tax revenues. If you have not already done so, please email: finance@mfa.bc.ca as soon as possible to convey your forecasted borrowing needs. During this time, our application and request for funding procedures have changed to require additional financial information for the review and funding allocation process. Our shortterm lending rate is currently 1.59% and is updated daily at www.mfa.bc.ca.

De-risking Pooled Investment Funds During cash flow uncertainty, we recommend reviewing your investment holdings against available options to ensure a priority on securities that are safe, readily accessible, and focus on preservation of capital.

We are closely monitoring financial markets and the impact of recent events on our Pooled Investment Funds.

The inherent diversification, secure structure, and professional, hands-on management by PH&N continue to make these funds valuable options for your portfolios. In addition, our Pooled High Interest Savings Accounts offer security and liquidity with well-known financial institutions in Canada.

To meet client demand for a liquid, governmentfocused fund, the MFA has shifted the emphasis of our “Intermediate Fund” within its existing mandate. This fund is now the “Government-Focused Ultra-short Bond Fund” (GFUSBF), adjusting the composition to the highest-quality, liquid Federal, Provincial, and Municipal securities. This newly-positioned fund will continue to have a Corporate bond element limited to securities issued by the Canada’s six “domestic systemicallyimportant banks” (D-SIBs): Royal Bank, Bank of

Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, and National Bank.

While this change predominantly meets our clients’ desire to focus on preservation of capital, this fund also presents a fossil-fuel-free investment option.

If you are considering rebalancing your holdings or need portfolio advice, contact us at: invest@mfa.bc.ca and one of our or PH&N’s senior team members will contact you to assist.

The MFA was designed as part of the fabric of BC Local Government, with a spirit of collaboration and support for all communities, regardless of location or size.

We are not profit-motivated and have no individual or corporate clients. Our entire focus is on serving local government through the provision of tailor-made financial solutions. Our team of financial professionals is available to assist you and your teams in navigating these unsettled and uncertain times. Please connect with us if you need informed and unbiased financial advice. •

PETER URBANC has 25 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 with Merrill Lynch, Lehman Brothers and Barclays Capital 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. Mr. Urbanc 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, Mr. Urbanc took on the role of Chief Administrative Officer at the Municipal Finance Authority of British Columbia. Mr. Urbanc holds a Bachelor of Commerce from McGill University and an MBA from the J.L. Kellogg School of Management.

We are your partners in finance.

And training.

The MFA is the single largest financial supporter of the GFOABC under our new Strategic Education Alliance.

Together we develop and deliver financial education and professional development.

Back to Basics - Bootcamp Regional District Day Quarterly Investment Webinars Financial Indicators course Debt Financing course Platinum Conference Sponsor

mfa.bc.ca

JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 9

“Yes, and…” Community and Economic Development More than ever, COVID-19 has increased our need to be fiscally prudent in everything we do - it is now much easier for us to fall into a “Yes, but…” mentality when engaged in capital and operational planning discussions.

Unfortunately, it is sometimes too easy to pass up or defer community and economic development initiatives to make way for apparently more urgent and pressing tangible asset management projects. These investments, however, should not have to be trade-off’s of each other; the outcomes of asset management and community and economic development can be brought together through thoughtful, integrated planning discussions. We now have the chance to think differently in how we move toward truly integrated planning which leverages more cross-functional synergies - a chance to adopt a “Yes, and…” mentality.

Intuitively, we know multiple projects often contribute to same or shared outcomes and benefits. More and more, municipalities are starting to explore and adopt integrated and program-wide approaches to capital, and operational planning. Integrated planning is more than just seeking for and capitalizing on operational and financial efficiencies. Effective integrated planning will bring together multiple functions to achieve 10 | GFOABC.CA

shared and common outcomes and benefits for residents, which incidentally often result in greater overall efficiencies.

As a first step, municipalities should start by creating a benefits map, which will then be used to develop the organization’s overarching benefits management framework.

A benefits map will help to ground cross-functional planning conversations by focusing teams on creating projects which contribute to medium and long-term benefits. Taking a benefits management approach to planning and performance measurement is not exactly a “new concept”.

It builds on existing performance measurement frameworks familiar to many and most municipalities.

We heard from our panelists at this year’s GFOABC Conference that

community and economic development initiatives often span partial or multiple fiscal years, and can be challenging to fit its results within a reporting framework bound by specific months and days. While community and economic development initiatives can be and is measured through a variety of quantitative indicators, it is often the broader narrative, and indirect and induced changes over time which demonstrate the critical importance of community and economic development for any community or region.

A benefits management framework helps to tell this story over time through its layered approach to defining benefits over different time horizons. The framework is meant to span multiple fiscal years and is periodically refreshed to ensure its

relevance and alignment to visionary ambitions of a community. It ensures we don’t lose sight of community and economic development impacts over time, and sets up a framework to systematically track incremental impacts over the short, medium, and long-term. A benefits-driven approach also creates the platform to start integrated planning discussions across functions.

As we shift efforts to recover and aim to thrive in the new reality, we must turn our teams’ attention to more than just tomorrow - by balancing strategic and tactical planning that is focused on delivering long-term benefits to residents, and realizing our municipal and regional aspirations and goals. •

VIVIAN CHAN is a Senior Manager in KPMG’s Global Infrastructure Advisory Practice. She works closely with all levels of governments in Canada in strategic planning, and definition and development of infrastructure projects and programs.

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The Remote Finance Team – Why, How and How Better Over the past decade, remote work has emerged as an increasingly attractive option for employers and employees. With the COVID-19 pandemic, remote work has become an immediate, unplanned necessity that finance departments the world over are scrambling to enable.

This sudden, forced change does beg some questions: • Why did it take this crisis to get finance to adopt remote work?

• How can finance utilize tools and techniques already at the organization’s disposal to enable working remotely?

• How can finance bolster remote work environments and use this as an opportunity to make their business processes more efficient, effective, and reliable?

Public sector finance, in particular, has been slow to provide staff with remote work options. Sure they can take their laptop home occasionally, but they are not encouraging working outside of the office. This reluctance is despite organizations often having access to advanced applications that facilitate remote work. So why the hesitation?

1) Workload First and foremost, I suspect that the initial reaction to any discussion

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of setting up finance to take advantage of remote work is, “We have too much to do right now to even think about a luxury like remote work.”

When you are dashing day in and out to get ready for the audit, get the budget approved, and 900 other things in between, it can seem like an easy decision to defer. The current crisis has forced remote enablement to the top of the priority list. To a large degree, this barrier has been toppled out of pure necessity.

2) The Bias of Senior Management Often the heads of finance are the most experienced team members, with decades of experience. In short, these highly qualified, skilled, and experienced individuals often predate the remote work movement. For much of their career, the technological advancements required to facilitate efficient remote work were not available. If these senior managers were early adopters, experimenting with remote work environments before the technology was truly ready, they would have been left skeptical. Finally, those with decades of success in traditional office environments may not have seen a need for change, ‘if it’s not broken, why fix it?’. Once again, current events have interceded to illustrate the need clearly.

3) Paper Dependence Many organizations drive all their business processes via paper. Every form must be physically signed, routed, approved, and then filed.

Processing payroll involves physical time cards, reconciling bank accounts, and physical statements.

So paper-dependent are these environments that remote work does not seem like an option. Paper dependence is still a significant hurdle to effective and efficient remote work and one that needs to be tackled head-on. If there is a ray of light to the scramble into remote work, it is that we anticipate it will provide an opportunity (if you elect to seize it) to improve business processes to the ultimate and considerable long-term benefit of the organization. We will provide suggestions for this in our subsequent articles.

4) Security Working remotely definitely adds additional security concerns that have to be addressed. The workstations/laptops that are fully managed and locked down at the office are now connected to users’ home networks that are insecure and have not seen any security best practices applied. This naturally makes IT very nervous. For those organizations that rarely if ever work remotely,

chances are that no VPN has been configured, thereby further complicating remote work. All these issues are real, however they are not insurmountable hurdles. Assuming your organization’s IT department is currently following security best practices, working remotely can be done securely if a couple of additional measures are taken.

If you are uncertain about your readiness for remote work, here is a list of 10 items (plus one bonus!) to begin your conversations with IT: • Ensure a secure VPN is configured both on the network edge as well as remote user’s laptops, and that they are trained on how to use it.

We wrote an article for finance officers who need to learn more about the basics of VPNs.

• Enable the built-in Windows Firewall on all computers (or deploy the IT recommended firewall) and ensure proper rules are configured.

• Make sure only office traffic flows through the VPN and all other traffic flows through the end user’s network (split DNS configuration on the VPN). We discuss this in some depth in the article for finance officers who need to learn more about the basics of VPNs. • Ensure all work sites accessed by users are using HTTPS.

• Ensure strong passwords are used, and ensure passwords are set to never expire. We wrote an article for finance officers who need to learn more about the basics of passwords too!

• Enable anti-virus on all computers and make sure they are set to auto-update.

• Make sure RDP (Remote Desktop Protocol) is not passed through on the edge network – either use VPN or make use of remote desktop gateway.

• Make sure important documents are either stored on the office network, or on a cloud storage provided by the organization as computers are certainly not being backed-up when remote.

• Ensure all computers are set to automatically download and install software patches daily.

• Perform full disk encryption on all computers (using BitLocker).

• Ensure VPN connections only have access to subnets required for the user to perform their functions.

5) Productivity Concerns If your organization does not support remote work typically, a significant

concern may be, “How do I know if my team is working?” In recent weeks we have even seen articles of managers deploying spyware to monitor staff while they work remotely. In our nearly decade of working in a 100% remote work environment, this has never been a problem. Our experience is the opposite, and the major benefits easily justify the investment. The flexibility for our team to work remotely means that we’re never late and have increased capacity to work through minor illness or meet constrained deadlines. •

JAMIE BLACK is President of F.H. Black & Company Incorporated. For the last 20 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 & effectiveness through the implementation of technology & best practices

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Cyber and Social Engineering Attacks: Don’t Let Insurance Gaps Leave You Vulnerable In 2018, hackers compromised Wasaga Beach’s servers for weeks before the town paid a ransom to regain control. In 2019, criminals posing as one of Saskatoon’s contractors used email fraud to misappropriate $1 million. That same year, Stratford City Hall paid $75,000 in Bitcoin to a hacker who crippled its network.

While these incidents were well-publicized, there are many more that never make the local news. Make no mistake: local governments – small, medium and large – are increasingly at risk of cyberattacks. The threat is particularly acute at the moment, when the demands of operating remotely have made organizations highly reliant on technology.

Strategies to prevent these attacks must be multi-faceted. Organizations should have sound IT security and a strong employee training program (as many attacks begin with an employee clicking a link or misplacing a device). Finally, since not all attacks are preventable, robust insurance coverage is essential.

Cyber Risks Cyberattacks can take many forms. Social engineering fraud – where a criminal impersonates a real person – is on the rise. We have all received phishing emails that invite us to click on a suspicious-looking link; however, cybercriminals are becoming increasingly sophisticated, making it difficult to distinguish between what is real and what is fake. Another example is ransomware, where hackers install malware on an organization’s network and demand a ransom to release control.

The losses and expenses arising from these attacks are myriad: • Out-of-pocket expenses to investigate the attack, respond to it, repair the damage and notify all persons whose data was affected; 14 | GFOABC.CA

• The cost to defend claims by third parties whose personal information was compromised; • Ransoms; and • Regulatory fines arising from privacy breaches.

Cyber Coverage Many local governments are already covered in some form against cyber risks. You may have coverage under a standard property insurance package, or you may have paid an additional premium for a standalone crime or cyber policy. Chances are, however, that coverage is insufficient. For example, many policies do not cover social engineering fraud.

The following coverage is standard under most cyber policies: • Security and privacy liability; • Multimedia and intellectual property liability; • Network interruption and recovery coverage; • Event support expense coverage; • Privacy regulatory defence & penalties; and • Network extortion.

Certain insurers offer additional features, including coverage for: • Social engineering fraud; • Cyber terrorism; • Bricking (damage to devices and hardware); • Payment card industry fines; • Reputational damage; and • Losses above the aggregate policy limit.

Finally, some packages include value-added services such as employee training, 24-hour hotlines, and options for handling ransom demands.

As with any other expense, local governments must engage in a cost-benefit analysis when shopping around for cyber coverage. A “Cadillac” policy may not be warranted in every case. Speak with your broker about what level of coverage is right for your organization.

There are a number of products on the market. The MIABC has recently developed a CyberPro Policy designed specifically for BC local governments, which covers all of the above risks and provides additional services. For more information, contact Erica Shi at eshi@miabc.org. •

ERICA SHI joined the MIABC’s Insurance Department as the Insurance Programs Administrator in May 2018. In this newly created position, Erica’s role is strongly memberfocused. She is the in-house subject expert for ancillary policy placements. She assesses and responds to Members’ calls for changes to insurance programs and assists Members in interpreting policy language. She also processes renewals, responds to new business opportunities, and assists in the development of the Insurance Department’s business infrastructure.

With 15 years experience in insurance industry, Erica held multiple roles in insurance company and different insurance brokerages. Erica graduated with a Bachelor’s Degree in Civil Engineering from Tongji University in Shanghai and later obtained a Bachelor’s Degree in Business Administration from SFU. Erica currently holds a General Insurance Agent Level 2 License and Chartered Insurance Professional (CIP) designation.

NICOLE PURVES is the Deputy Director of Insurance at the MIABC. Nicole has worked in the insurance industry for 20 years, primarily involved in claims handling, specializing in casualty claims. She has been with the MIABC since 2008. She has also received her designation as a Chartered Insurance Professional.

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JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 15

Anything Worth Doing Is Worth Doing Right – The Benefits of Correcting Errors and Restating the Financial Statements Management is responsible for the preparation and presentation of the financial statements in accordance with Canadian Public Sector Accounting Standards (PSAS). In discharging its responsibilities for the integrity and fairness of the financial statements, management must ensure accounting systems, internal controls, and records are properly maintained to provide reliable information.

But sometimes mistakes make their way into financial statements; and when an error is discovered, it should be corrected. That’s exactly what the Peace River Regional District (PRRD) did in preparing its 2018 audited financial statements. They discovered a material accounting error dating back to prior years and took the painstaking steps to make it right. This article aims to shed light on the benefits of correcting errors and the value of restating the financial statements.

standards requires professional judgment but the choice was clear; the 2018 financial statements had to be restated in order to correct the error.

Background After the audit of the 2018 financial statements, the Chief Financial Officer at the time, Lyle Smith, questioned why the auditor had made the following adjusted year-end entries that resulted in:

Lessons Learned and Benefits of the Restated Financial Statements Fundamentally, the exercise in restating the 2018 financial statements was required under PSAS. When material errors are identified, it is the duty of the government and management to resolve those errors. Integrity and fairness are at the core of management’s responsibilities, and as such, restating financial statements should be encouraged and not something to fear.

Furthermore, a key benefit of the restatement provided PRRD with improved confidence and support from the Board. Financial statements are fundamentally a communication tool; improving the accuracy will serve to improve the overall trust in the statements. Smith underscored the integrity of the numbers as the most important reason changes were made to the financial statements. After explaining the issue and reviewing the resulting statements, the Board was very supportive of

• $2.26M understated tax requisition revenue • $12.39M overstated tax receivable Smith examined the discrepancy and noticed material accounting errors from prior periods. In previous years, the auditor was performing a majority of the year-end entries and misunderstood the nature of the tax requisition for the regional government. In doing so, the auditor recorded $13.9M in tax receivable which represented future years tax requisitions.

Smith determined the revenue recognition was contrary to PSAS 3510 - Tax Revenue because the taxable event had not yet occurred. Applying accounting 16 | GFOABC.CA

“As painful as it may be, it was for the integrity of the organization” —Former Chief Financial Officer, PRRD, Lyle Smith

Once the material errors had been addressed and the financial statements had been restated, the issue was brought forward to the Board with confidence that the accounting error had no impact on the Regional District’s cash position.

Smith’s leadership having engaged with consultants and the auditor to improve and prepare PRRD’s restated 2018 financial statements.

Conclusion The example Peace River Regional District has created is commendable and highlights an effective path for others to follow. They took the opportunity to address not only the identified material errors, but ensured that the overall accuracy of the financials could be verified and improved.

Financial statements serve the interests of many users. The Board and elected officials should easily be able to assess whether the government’s financial position has improved or deteriorated and how that impacts their organization. •

LYNDA NGUYEN is a CPA, CMA with over 15 years’ experience in corporate accounting, budgeting, forecasting, financial analysis. Her vibrancy and knowledge have fueled success in public and private sectors. She enjoys working with senior leaders to support the strategic decision-making process by providing analysis, advice, and recommendations.

Figure 1: Peace River Regional District, Consolidated Financial Statements, Notes to the Financial Statements FY2018, Note 24.

For the full note see pg 19 https://prrd.bc.ca/wp-content/uploads/page/annual-financials/2018-Annual-Financial-Statement.pdf JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 17

e c o n o m i c o ut lo o k q 2 provincial outlook: all in the same boat The phrase “we’re all in this together” has become commonplace in describing how everyone’s way of life has been impacted to at least some degree by the COVID-19 outbreak, and how everyone has at least some part to play in flattening the curve. Provincial economies have also been in this together, in terms of having seen big negative impacts from social distancing measures, including those that haven’t seen particularly severe outbreaks. However, as we look forward to the speed at which provincial economies will likely reopen and recover, larger discrepancies will become apparent, particularly when thinking about some of the lasting scars from this crisis as relates to energy prices and tourism.

The Near-Term The severity of the COVID-19 outbreak has varied between provinces. While BC appeared to be headed towards a severe outbreak in its early stages, the province was able to flatten the curve fairly quickly. On the other hand, and more recently, Quebec has been the epicenter of the COVID-19 outbreak in Canada (Chart 1). Other parts of the country have been severely impacted to, including Ontario, Alberta and Nova Scotia. All provincial economies have been impacted by social distancing measures.

Official Statistics Canada figures for retail sales, etc. for the month of March are still almost a month away.

That means that one of the only pieces of official news we have for the post-lockdown effect on provincial economies is working hours from the Labour Force Survey. This survey, of course, is a very volatile series, but is shown to have been severely impacted. Judging the declines seen among provinces against the usual volatility in this data series, the sharp falls in BC, Ontario and Quebec still seem more meaningful than others (Chart 2).

Because of the speed at which the downturn in global and provincial economies has hit, the economics profession 18 | GFOABC.CA

has had to be more creative in identifying the data upon which we can rely. Weekly and daily figures related to traffic congestion and the mobility of the population have become increasingly important in economic forecasting.

For example, recently released mobility data that track movements of smartphones point to a bigger decline in activity versus the baseline in Ontario and Quebec (Chart 3). However, potentially more interesting is that these figures appear to point to a slight improvement in BC,

which suffered an early outbreak of COVID-19, but also had early successes in flattening the curve and reducing case numbers. While there’s been no official change in stance yet, and as such this slight pick-up could be due to people being more confident venturing out to shops that were always allowed to be open, being a week or two ahead of other areas of the country could have significant implications in terms of economic damage over the year as a whole.

well—two important drivers of growth recently in the maritime provinces. As such, the bounce back in 2021 could look stronger in Quebec, for example, than Nova Scotia and PEI. •

The Lasting Scars For a few provinces, the three months of summer are of greater importance to the full year’s total economic activity and income. However, while it’s likely that more businesses will be open by that time, there will most likely still be restrictions in place regarding staffing and customer numbers. It’s also hard to envisage a quick rebound in the key summer source of income for many such provinces— tourism. As a proportion of GDP, tourism has been a much bigger contributor to growth in coastal areas such as PEI, Nova Scotia and BC (Chart 4). However, the impact of a slow recovery in tourism runs deeper than just that direct channel. ll In The Same Boat?

While all provinces have been in the same boat recently, divergences regarding the near-term opening up of economies and longer-term implications are starting to be seen. Success in stemming the spread of COVID-19 in areas such as BC, Manitoba and Saskatchewan could see their local economies start to open back up a little faster than Ontario and Quebec’s, for example (Table 1). In some respects, recent mobility data suggests that trend could already be starting. Given the severity of the economic paralysis, a couple of weeks could make a big difference to year-end growth rates (or rather contraction rates) and government revenue. Looking out more than a month or two, however, there are certain elements of this downturn that will persist longer than others and also lead to divergences in the rates at which provinces recover.

The most obvious is oil, which of course will weigh most heavily on Alberta. However, it’s not the only one. Travel restrictions will remain in place to at least some degree, impacting tourism and potentially immigration trends as JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 19

Canadian Forecast Summary

20 | GFOABC.CA

Sources: Bloomberg, Statistics Canada, Bank of Canada Alberta Treasury Board of Finance, CMHC, CREA CIBC World Markets Inc. JAMES HOBSON, CFA, PM, First Vice-President, Portfolio Manager, Investment Advistor & Chairman’s Council Member 403-260-0574 james.hobson@cibc.ca CHARET CHAHAL, CIM, Portfolio Manager, Investment Advisor & Chairman’s Council Memeber 403-260-0440 charet.chahal@cibc.ca This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2020. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. James Hobson and Charet Chahal are Investment Advisors with CIBC Wood Gundy in Calgary The views of James Hobson and Charet Chahal do not necessarily reflect those of CIBC World Markets Inc. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

CHART OF ACCOUNTS

JAMES HOBSON, CFA With over 10 years of experience at CIBC, James focuses on identifying major market themes, analyzing equity and fixed income securities, and monitoring client portfolios to ensure investment policy compliance. Among the numerous charities he assists, James is a long-time supporter and donor for the Kids Cancer Care Foundation of Alberta.

CHARET CHAHAL, CFA Prior to joining CIBC Wood Gundy, Charet worked in the oil and gas sector, developing a wealth of experience in energy markets. Charet also managed and led a start-up business venture to be listed on the public exchange. Charet is an avid supporter of the Calgary Children’s Hospital.

JUNE 2020 • DOLLARS & SENSE PERSPECTIVE | 21

CIVICINFOBC CIVICINFOBC

q u a rte r ly q u estio n

credit card payments…what’s your practice?

We received responses to this question from close to half of all BC local governments of varying populations and geographical locations. Credit cards are accepted by 53% of local government respondents. One third of these local governments accept credit cards for payment for property taxes and more than half accept credit cards as payment for utilities.

Local governments that accept credit cards report accepting for the following:

Demographics do not seem to be a factor as communities of many sizes, staffing levels, and geographic locations reported accepting credit card payments. Just over half of all local governments reported using Moneris for their merchant processing needs while the remainder were scattered across many providers, with fees ranging from 1.2% to 2.5%.

If you would like to learn more about this free service, contact CivicInfoBC at info@civicinfo.bc.ca

?

quarterly question

the next Quarterly Question: COVID…what changed for you?

APLEASE USE THIS LINK TO BE A PART OF THE RESULTS The survey should only take about 2–3 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

22 | GFOABC.CA

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next newsletter publication is september Please contact us if you would like to submit an article or suggest a newsletter topic. office@gfoabc.ca • 250.382.6871

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