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District financial plan lacks elements of a plan

More than two decades ago, the provincial government decided that annual budgets were inadequate and that sound local government decision-making requires planning. The legal requirement for an annual budget was thus replaced with a provision for five-year financial plans to be reviewed and updated annually.
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More than two decades ago, the provincial government decided that annual budgets were inadequate and that sound local government decision-making requires planning. The legal requirement for an annual budget was thus replaced with a provision for five-year financial plans to be reviewed and updated annually.

What is the difference between a budget and a financial plan? A budget is an itemized listing of expected revenues and expenditures over a fixed period. In a personal budget, revenues are the horse and expenditures are the cart: this is my income, and this is how I am going to spend it. Governments have a tendency to put the cart before the horse: this is what we promised or want to do, and this is what we need to pay for it.

If the Regional District of Kitimat-Stikine’s idea of a financial plan were applied to a house building project it would look something like this: foundation $5,000, framing $12,000, roof $10,000, wiring $7,000, plumbing $3,000, finishing $3,000; total $40,000. This is not a plan, it is a budget.

The Government Finance Officers’ Association (GFOA) defines a financial plan as a strategic exercise, a priority-setting process. The purpose of the plan is to “corroborate policies in place and also identify new policies that may be needed.” The plan “should address the processes for executing the plan to ensure tangible results are realized” and the approval process is a “highly participative process that involves elected officials, staff, and the public.”

The Regional District’s 2018-2022 financial plan, a 75-page spreadsheet stuffed with headings and numbers, is not a plan. It should be a schedule attached to a financial plan, but as it stands it is not a financial plan.

What are the board’s objectives? What are its priorities? How are the citizens, to whom the board is accountable, to monitor and evaluate the board’s decisions? Year-end audited statements may prove that money was lawfully spent, but that is not good enough.

Without defined objectives, how do we know that we are on the right track? When everything is priority #1 it means that there are no priorities. We just do what we have done before and hope that it will all turn out okay. How can citizens know whether a dollar figure attached to a label is reasonable, appropriate, needed, or a waste of money?

Line item 0156-2-121-2300 on page 40 is an example. What is the justification for planning to spend $4,500 every year from 2018 to 2022 on professional fees in the administration of the Heritage Register? An expenditure of $4,500 was planned for in 2017, but no money was spent on this account in 2016 or 2017. What is a citizen to make of that?

The Regional District Board could outline the Heritage Register’s objectives in a couple of sentences. It could lay out the measures it will take in the pursuit of these objectives. With just a few words the board could thus provide meaning and context for the revenues and expenditures shown on page 40. This information would enable citizens to make sense out of the financial plan’s line items. Most importantly, it would provide citizens with a reference point to hold their board accountable.

Regional District board members may want to take a look at the GFOA’s best practices for long-term financial planning. It offers good and useful advice.