Financial audit shows City managed its operation well during COVID-19

According to a financial audit by EY for 2020, and despite the challenges posed by COVID-19, the City of Fredericton continues with its strong record of financial responsibility. 

The City has received a clean audit report for its financial practices during 2020.  During the year, it continued with its long-term plan to investment in municipal infrastructure, although it is starting to fall behind with its yearly plan to replace aging infrastructure.

The audit also showed that the City ended the year with an overall surplus of just 2.2% ($2.8 million) in its General Fund budget of $125.1 million. This was from a combination of decisions made early in the pandemic to defer $1 million in funding for the Officers’ Square Revitalization Plan, as an initial step to address shortfalls, and pursue other revenue generating and cost saving measures to ensure a balanced budget. The surplus will be applied to the 2022 Budget cycle.

“Like so many others, we adjusted programs and services throughout 2020 to deal with the impact of COVID-19 and keep residents and staff safe,” said Coun. Greg Ericson, Chair of the City’s Municipal Finance & Corporate Administration Committee. 

“We certainly appreciate the federal and provincial governments for recognizing the problems being faced by municipalities and for providing a response to our financial challenges. It was a welcome announcement at the end of 2020 and very valuable and significant to our financial situation.”

The Audited Financial Statements show that the City’s continues to use strong financial practices to mitigate risks, show prudent financial management, focus on long-term goals, and reflect responsible governance.  The municipality’s financial reporting uses Public Sector Accounting Standards, which provides a complete picture of everything the City is responsible for.

The goal of the City’s long-term financial plan is to invest the right amount of money, at the right time to replace underground pipes, roadways, facilities, and equipment, etc.  Due to a number of competing demands, including a $1.1 million structural operating deficit, the City is falling behind in its yearly replacement targets.

As noted, the surplus resulted from a combination of decisions made early in the pandemic to defer $1 million in funding for the Officers’ Square Revitalization Plan, as an initial step to address shortfalls, and pursue other revenue generating and cost saving measures to ensure a balanced budget.

The City received an additional $493,138 in building permit revenue, had savings of $261,587 due to lower interest rates and addition interest income, $158,061 savings in property taxes primarily resulting from a reduction to taxation on Transit facilities and various other savings in service provision. There was also $424,493 generated by the City’s subsidiary companies.

COVID-19 impacts for the City of Fredericton were revenue losses of $1.9 million and additional expenses of $600,000 were offset by $1.8 million received for COVID Safe Start funding and City savings of $700,000.

By provincial legislation, the City of Fredericton’s Water & Sewer Utility is self-funded and separate from the City’s General Fund budget. Due to the inability to complete some planned work due to COVID-19, the Utility ended 2020 with a surplus of $1.7M in its $22.3M budget. These funds will be applied to the 2022 Budget cycle.

The 2020 City of Fredericton Audited Financial Report was presented to the City’s Municipal Finance & Corporate Administration Committee on April 22, 2021 by EY.  The audited financial report will be forwarded to the City Council meeting of April 26, 2020 for formal adoption.

Audit Highlights:

  • Expenditures by Programs Results areas for 2020:
  • Public Safety - $45.9M
  • Mobility - $30.5M
  • Livable Community - $22.7M
  • Waste & Wastewater - $17.3M
  • Economic Vitality - $8.0
  • Governance & Civic Engagement - $4.7M
  • Environmental Stewardship - $$4.8M
  • Sustainable Infrastructure $1.9M
  • Corporate Services - $2.1 M
  • Combined revenue numbers for the City in 2020 totalled $151.8M, with the largest source of revenue for the City being property taxes at $108.2M.  The bulk of the remaining revenue comes from sales, fines, and other fees; infrastructure funding from the federal governments; and services to other governments.
  • Compared to 2019, the City experienced an increase in revenue of just 0.03%, and an overall increase of expenses of 0.06%.
  • The City of Fredericton has been steadily decreasing its net debt over the years.  The City has set a debt ceiling for itself of 8%, which means that no more than 8% of revenues can be used for debt payments each year. In 2020, the City’s debt servicing costs to revenue was at 3.8%.
  • The long-term financial goal is to replace infrastructure as it reaches the end of its usable life, with money already in the budget, and not to borrow money or go back to the taxpayer for a tax increase.
  • The total replacement value of the City’s infrastructure is $1.65B.
  • The Audited Financial Statements include all the City’s Consolidated Funds and Entities, including General Fund, Water & Sewer Utility, Land Funds, etc.  Subsidiary entities like e-Novations Comnet, Inc., Newmarket Properties Inc. (Fredericton Boyce Farmers Market), and Fredericton Convention Centre.
  • Municipalities are mandated to operate with a balanced budget. Any surplus must be spent in the next available budget cycle.  In this case, that is 2022.
  • During 2020, the City of Fredericton reduced its long-term debt, continued investment in infrastructure (albeit at a slower pace), leveraged cash to earn interest, obtained a $13.5 million consolidated surplus in municipal infrastructure, and fully funded its vacation and overtime liability.