In 2007 I requested a forensic audit (or forensic accounting) of the sewer fund under section 172 of the Community Charter. My request implied that I was not comfortable with the Municipal Auditors presentation of Audited Financial Statements. Much to my surprise I found out that the Auditor the Municipality hired to do the job was the same Chartered Accountant who did the original audits.
Does that make sense? Would anyone go to the same doctor for a second opinion? I hardly think so.
The reason for my request was simple: I did not believe that the expenditure of nearly $1 million of taxpayers’ money was fair to those taxpayers. The legal opinion did strengthen that belief. Here are the facts. When Council decided to extend the sewer from McClounie to Aberdeen Road they had two legal options available.
Option 1 was to require the developer to connect to the sewer at his expense from the site of his development to the existing sewer at McClounie Road. Council had the legal right to require him to oversize the system to allow for future connections. In exchange the developer had the right to collect latecomer fees with interests during the next 10-15 years from householders wishing to connect to the system.
The beneficiaries of this option would be the developer and those householders along the route who wished to connect to the trunk line. Those customers would also pay the cost of the construction of the trunk line. The fact that they had a ready made system to which to connect was already an advantage provided by the utility’s existing customers.
Option 2 was to extend the sewer line from McClounie to Aberdeen Road at taxpayers expense. This option cost taxpayers $665,000 (plus an additional $250,000 to buy out the latecomers’ fees for a total expenditure by the utility of $915,000). Other involuntary contributors to the project are all the property owners along the new trunk line. All those property owners are assessed an annual tax of $97.54 even if they are not connected. The developer contributes nothing to this trunk line.
Beneficiaries of this option are the property owners who connect to the line and the developer who also connected to the line via an additional trunk line. One anomaly is that each property owner who connects must pay a connection fee of $2,000 but the developer, who will be connecting up to 160 units to the line, paid no connection fee.
Apparently, both options are perfectly legal under the Community Charter. The question is: which option is fair to the taxpayers?
The answer to the above question is simple: Option 1.
When we elect representatives to manage our affairs and our money we entrust them to handle our money to get maximum benefit for the majority. Obviously, of the above two options Option 1 was fairer to the taxpayers.
The developer, who is also a taxpayer, has the advantage of recovering his costs from his customers when they buy into his development. Those customers have the choice of buying at the cost that included the cost of sewer. If sewer costs make the development too costly then the developer has the option not to proceed.
Option 2 gives no options to the taxpayers.
Having depleted the utility’s reserves Council had to raise sewer fees to recover the spent reserves ($60*2000customers*20years = $2,400,000). That was definitely not in the best interest of taxpayers who put their trust into the hands of Council.
The above options should have been considered by Council when they made their decision to extend the sewer trunk line.
Council had additional information. Their survey indicated that the overwhelming majority of residents along the proposed new line opposed the extension and did not want to connect to sewer. To date only a couple of home owners connected.
There were no health or environmental concerns that required to extend the sewer. Prior to the decision there was no environmental or health assessment done and no urgent need was identified.
The only urgency was a letter penned by the developer urging Council to construct the extension. Having been a former Councillor he even offered ways to pay for the costs using funds from the existing utility’s reserves (Exhibit 1).
In my opinion that was not a legitimate reason to choose Option 2. A developer should not dictate to Council when to extend the sewer and who should pay for it.
The Mayor of the time declared conflict of interest when issues relating to Coldstream Meadows were discussed. However, he was presiding over the meeting (and hence voting) where the bylaw awarding the contract for the trunk line construction was finally adopted (http://www.districtofcoldstream.ca/council/minutes/2005/20051128_minutes.pdf page 11). Did he have any influence in choosing Option 2? I don’t know.
Our staff should have been aware of the options available to Council and should have made vigorous representation to Council to make them aware of those options.
The Auditor should have been aware of those options as well and should have made note of the frivolous waste of taxpayers dollars. It appears that he did not.
Faced with two equally legitimate options Council should have chosen the one that did not cost the taxpayers money and that is Option 1.
Another concern is the cost. Mr. Cockburn reports that “The concerns raised by Mr. Kiss are legal in nature....” My concerns therefore were forwarded to the solicitors.
If that is the case how could Mr. Cockburn justify the fee of $6,530? His report of January 4, 2008 consists of a single page with no data of any value.
This might explain his absence from Council this year when his Audited Financial Statement was presented to Council. My repeated requests to have him appear at a public Council meeting were denied. Why?
I was also surprised that neither the solicitor nor the Auditor contacted me to solicit my input. It is a generally accepted expectation that the complainant is heard by the investigators before a decision is rendered.
The timing of the release of the legal opinion is interesting. The report was received by the District on July 6, 2007 yet it was released to the public at the September 22, 2008 Council meeting (15 months later) along with the cost of the report. It has the appearance of accusing me of wasting taxpayers money by requesting expensive and useless studies.
This is the main reason for my appearing before you at this time. $6,500 is a lot of money indeed, especially if we look at the quality of the report. However, since my action revealed the facts about the waste of nearly $1 million of taxpayers’ money it was probably worth it.
In conclusion here the major points of my presentation:
1. The forensic audit should have been carried out by an independent Auditor.
2. There were two legal options available to Council prior to extending the sewer trunk line. Common sense would have required that Council selected the one with greatest benefit to the taxpayers. This was not the case. Was the choice of action an innocent oversight or was it a deliberate attempt to help the developer at taxpayers expense?
3. Excessive fee charged by the Auditor.
4. No opportunity to meet and question the Auditor.
5. No opportunity for an input before reports were prepared.
6. There seemed to be an attempt to discredit me and implications that I was wasting taxpayers money. This presentation is an attempt to justify my actions and I hope I have met that task.
Does that make sense? Would anyone go to the same doctor for a second opinion? I hardly think so.
The reason for my request was simple: I did not believe that the expenditure of nearly $1 million of taxpayers’ money was fair to those taxpayers. The legal opinion did strengthen that belief. Here are the facts. When Council decided to extend the sewer from McClounie to Aberdeen Road they had two legal options available.
Option 1 was to require the developer to connect to the sewer at his expense from the site of his development to the existing sewer at McClounie Road. Council had the legal right to require him to oversize the system to allow for future connections. In exchange the developer had the right to collect latecomer fees with interests during the next 10-15 years from householders wishing to connect to the system.
The beneficiaries of this option would be the developer and those householders along the route who wished to connect to the trunk line. Those customers would also pay the cost of the construction of the trunk line. The fact that they had a ready made system to which to connect was already an advantage provided by the utility’s existing customers.
Option 2 was to extend the sewer line from McClounie to Aberdeen Road at taxpayers expense. This option cost taxpayers $665,000 (plus an additional $250,000 to buy out the latecomers’ fees for a total expenditure by the utility of $915,000). Other involuntary contributors to the project are all the property owners along the new trunk line. All those property owners are assessed an annual tax of $97.54 even if they are not connected. The developer contributes nothing to this trunk line.
Beneficiaries of this option are the property owners who connect to the line and the developer who also connected to the line via an additional trunk line. One anomaly is that each property owner who connects must pay a connection fee of $2,000 but the developer, who will be connecting up to 160 units to the line, paid no connection fee.
Apparently, both options are perfectly legal under the Community Charter. The question is: which option is fair to the taxpayers?
The answer to the above question is simple: Option 1.
When we elect representatives to manage our affairs and our money we entrust them to handle our money to get maximum benefit for the majority. Obviously, of the above two options Option 1 was fairer to the taxpayers.
The developer, who is also a taxpayer, has the advantage of recovering his costs from his customers when they buy into his development. Those customers have the choice of buying at the cost that included the cost of sewer. If sewer costs make the development too costly then the developer has the option not to proceed.
Option 2 gives no options to the taxpayers.
Having depleted the utility’s reserves Council had to raise sewer fees to recover the spent reserves ($60*2000customers*20years = $2,400,000). That was definitely not in the best interest of taxpayers who put their trust into the hands of Council.
The above options should have been considered by Council when they made their decision to extend the sewer trunk line.
Council had additional information. Their survey indicated that the overwhelming majority of residents along the proposed new line opposed the extension and did not want to connect to sewer. To date only a couple of home owners connected.
There were no health or environmental concerns that required to extend the sewer. Prior to the decision there was no environmental or health assessment done and no urgent need was identified.
The only urgency was a letter penned by the developer urging Council to construct the extension. Having been a former Councillor he even offered ways to pay for the costs using funds from the existing utility’s reserves (Exhibit 1).
In my opinion that was not a legitimate reason to choose Option 2. A developer should not dictate to Council when to extend the sewer and who should pay for it.
The Mayor of the time declared conflict of interest when issues relating to Coldstream Meadows were discussed. However, he was presiding over the meeting (and hence voting) where the bylaw awarding the contract for the trunk line construction was finally adopted (http://www.districtofcoldstream.ca/council/minutes/2005/20051128_minutes.pdf page 11). Did he have any influence in choosing Option 2? I don’t know.
Our staff should have been aware of the options available to Council and should have made vigorous representation to Council to make them aware of those options.
The Auditor should have been aware of those options as well and should have made note of the frivolous waste of taxpayers dollars. It appears that he did not.
Faced with two equally legitimate options Council should have chosen the one that did not cost the taxpayers money and that is Option 1.
Another concern is the cost. Mr. Cockburn reports that “The concerns raised by Mr. Kiss are legal in nature....” My concerns therefore were forwarded to the solicitors.
If that is the case how could Mr. Cockburn justify the fee of $6,530? His report of January 4, 2008 consists of a single page with no data of any value.
This might explain his absence from Council this year when his Audited Financial Statement was presented to Council. My repeated requests to have him appear at a public Council meeting were denied. Why?
I was also surprised that neither the solicitor nor the Auditor contacted me to solicit my input. It is a generally accepted expectation that the complainant is heard by the investigators before a decision is rendered.
The timing of the release of the legal opinion is interesting. The report was received by the District on July 6, 2007 yet it was released to the public at the September 22, 2008 Council meeting (15 months later) along with the cost of the report. It has the appearance of accusing me of wasting taxpayers money by requesting expensive and useless studies.
This is the main reason for my appearing before you at this time. $6,500 is a lot of money indeed, especially if we look at the quality of the report. However, since my action revealed the facts about the waste of nearly $1 million of taxpayers’ money it was probably worth it.
In conclusion here the major points of my presentation:
1. The forensic audit should have been carried out by an independent Auditor.
2. There were two legal options available to Council prior to extending the sewer trunk line. Common sense would have required that Council selected the one with greatest benefit to the taxpayers. This was not the case. Was the choice of action an innocent oversight or was it a deliberate attempt to help the developer at taxpayers expense?
3. Excessive fee charged by the Auditor.
4. No opportunity to meet and question the Auditor.
5. No opportunity for an input before reports were prepared.
6. There seemed to be an attempt to discredit me and implications that I was wasting taxpayers money. This presentation is an attempt to justify my actions and I hope I have met that task.
Exhibit 1
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