Cornwall city hall
CORNWALL, Ontario - After years of being warned by its auditors that it is playing with financial fire, it appears as though city hall is finally taking the comments to heart.
City council has authorized some changes to its reserve fund policies to ensure it keeps money set aside for a rainy day.
This year, and in 2013, city auditor Ross Markell warned the city it was not saving enough money to prepare for unforeseen expenses.
In one case he even suggested the city would have to borrow money to pay for operating expenses in a worst-case scenario.
Now, if city bean counters remove money from a reserve fund, it will be forced to pay it back with interest, and must get authorization from the manager of financial services.
Also, withdrawls from reserve accounts that have not been budgeted will have to be approved by city councillors.
"This is finally down on a piece of paper," said Coun. Denis Carr, who has been critical of past decisions when the city, including councillors, would sanction the spending of money from reserve accounts. "You can't just take it out anymore."
Back in April, when Markell presented his financial review, the city's reserve accounts were actually in a deficit position to the tune of $240,000.
"If you look at the working funds, they're in a negative position," said Markell at the time. "You're in a position now where you have overspent. They will build themselves back up in a couple of years...(but) you have to do something."
The city was in that position because it purchased $2-million worth of land in the industrial park without having sufficient money in the working reserve account.
The city could have borrowed money to pay for the land, but instead opted to pay for it outright.
Markell indicated the city should have financed the purchase and then paid that debt off when the land was eventually sold.
Aside from its reserve accounts the city is in a stable financial situation, experts agree. The city ended 2013 with a small deficit of $145,000, which may seem like plenty to lay person but is actually a pittance compared to the total budget of nearly $160 million.