BARRHEAD - The Town of Barrhead is in a solid financial position, and its books are accurate.
At least they were in 2023.
That is according to Scott Ellerington of Ellerington LLP, who presented his 2023 audit report of the municipality's finances during the March 12 council meeting, giving the town an unqualified report.
"Sometimes, I wish there were some mistakes because it might make my job more interesting and my report to council more exciting," he said.
Under the Municipal Government Act (MGA), municipalities must submit an annual financial audit to the province.
An unqualified report means the auditor did not find any issues with the financial records, and town staff tabulated them using standard accepted accounting practices.
One change that councillors may have noticed over the last several years is a change in how municipalities have to plan for and keep track of the retirement and replacement of certain types of assets.
"Anything with a long-term life and a future cost to retire," Ellerington said.
With the input of the municipality's engineers, he said they determined three municipally-owned buildings [the bowling alley, curling club and RCMP Detachment] would have "an asset retirement obligation."
He said these buildings met the criteria because all three likely had asbestos. `
"So you have buildings that are continually decreasing in value, but the cost of retiring them is going up," he said, adding that the jointly municipally operated Barrhead Regional Landfill also falls into this category.
Ellerington said one of the best indicators of a community's financial health is its debt limit.
He added that under the MGA, the province allows the municipality to carry a debt limit of about $22 million, noting as of the end of 2023, the town's debt was $3,885,212.
Similarly, Ellerington said the town was allowed to have up to $2.6 million in annual debt payments.
"The actual debt payments are around $290,000 annually," he said, adding that the long-term debt came from a $5 million debenture in 2016. "You can see the town has been very conservative. There is a lot of nice room if you need to use it."
The town used the debenture to pay for half of the construction of the Barrhead Regional Aquatics Centre, which it partnered with the county to build. The municipality has paid off roughly $1.115 million of the debenture.
"The interest rate is extremely low at three per cent, and the town is locked in until 2041," Ellerington said. "You might even be able to pay off the debenture slower and put the money into debentures because of the higher interest rates, where the money can do something for you."
Ellerington next considers an entity's debt ratio, which is simply its debt divided by its assets, when determining it.
"Often, when looking at a private business, it is common to see a debt-to-asset ratio of 40 per cent. That gives us a pretty good indication that the entity will survive in the long run," he said. "The Town of Barrhead's debt-to-asset ratio is a robust six per cent. There is no real concern of financial problems."
Ellerington added that the other thing that goes hand-in-hand with the debt-to-asset ratio is working capital.
He said at the end of 2023, the town had $9 million in working capital.
"You want at least a one-to-one ratio so there is enough cash to pay your bills. The Town of Barrhead's ratio is 12-to-one, so there is much more than is necessary," he said.
Ellerginton also praised the town's "very strong" cash flow position, stating that the municipality's cash flow is about $1.3 million, and for actual operations, it is $4.2 million.
"There's nothing to criticize. Everything is great. Our audit opinion is that it is unqualified, with no material misrepresentation, and the town is in a good financial position. You can see there has been good management," he said.
