Counting things

Twelve years after amalgamation we now know what we own and how much it’s worth. For perhaps the first time ever we know the value of things we own as a municipality. It sounds like a minor accomplishment—something that should have been known all along.

It is, however, a massive and terribly important achievement by the County’s finance team—one deserving of our recognition and praise. I’ll explain why.

Indeed, counting and valuing assets is a basic responsibility for most organizations. Knowing the current value of your things and how fast they are depreciating (losing value over time) tells you a lot about how to prepare for the future.

In most households our assets are our home, everything in it, cars and investments and such. Knowing how much your house is worth tells you how much money you need to have put away in case the roof blows off or eavestroughs needs to be replaced. It tells you if you are earning enough to support the assets you have and about your ability to replace them when they wear out.

For that is the thing about things—they wear out. Many, but not all, lose value over time. For example, even the sturdy town hall in Wellington, left on its own, would eventually crumble into the ground. So we fix it, maintain it and shore it up when things get bad. But how do we know when this stops making sense?

Some will say never. And perhaps they are right. But it is difficult to make that call without knowing how much it is worth—and how fast it is losing or gaining value. Only then can the argument rise above sentiment alone and numbers can help us understand the choices we make. Only then can we really know whether we can afford the house we are living in.

So this is what we have learned. At the end of last year, your County had assets that cost $309.9 million to acquire— approaching a third of a billion dollars. That converts into about $12,300 per resident of Prince Edward County. However, accumulated depreciation (value lost since the assets were purchased) and amortization (value depleted in 2009) reduced the value of these assets to $192.6 million by the end of the year.

What does this tell us?

We know our house is worth nearly $200 million, but its value is dropping quickly—nearly $7 million in value lost last year alone.

The County Finance Chief Susan Turnbull explained the unsettling reality of this number to a committee of council last week.

“Our assets were worth $7 million less at the end of the year than they were worth at the beginning,” said Turnbull. “Yet we only put about $200,000 into reserves. Clearly there is a gap we need to understand and manage.”

It is point that bears emphasis—if we are unable to put away enough money to pay for the replacement of our assets then they will reach the end of their useful life and we won’t be able to replace them.

Better, perhaps, to make those choices before that time arrives. That is what this information allows each of us to do. How we got this far in the history of this municipality without knowing what our assets are still boggles the mind. The fact that, just a few years ago, graders and dump truck purchases were lumped in as expenses alongside labour and insurance is still astonishing. It can be no surprise that councils of the day lost track of their business—the few numbers they had made no sense from one year to the next.

This is changing. Enormous credit goes to the County’s finance team led by Susan Turnbull and James Hepburn. It is one thing for a new company or organization to begin keeping track of inventory and assets. It is quite another to begin this process from scratch in an organization a third of a billion dollars in size. Yet another still when one considers the diverse array of assets the County owns and the geography they are scattered across.

In total the nearly two-year project counted, valued and recorded 16,198 assets. They tallied land, buildings, vehicles, computers, roads, sewers, water mains, bridges, equipment, tools, desks and pencils. They valued sewer plants not yet built.

The project was mandated by the province. Turnbull reported to the committee that the provincial auditor overseeing the work praised the work done by the County’s finance team.

“The auditor advised that he has yet to see as thorough and robust process and methodology as was implemented by the County,” said Turnbull. “It has been a long time coming but it is solid.”

Having solid earth under their feet, in the form of accurate, timely and relevant financial information, will be an important advantage for the next council—an advantage previous councils had to do without.

Now they, and the rest of us, must learn how to use this information.

rick@wellingtontimes.ca