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Councillors get a lesson in cost accounting

It was relatively light and seemingly non-controversial agenda at the Finance and Administration Committee meeting. In fact, there were no motions before the committee—only staff reports. One staff report, Ward Specific Funding Initiatives, attracted councillors attention in particular. Ward Specific Funding Initiatives is another name for the discretionary fund that was established for each of the old city of Hamilton wards at Amalgamation. The idea was that with the realignment of the tax base, the old wards would be entitled to a small tax reduction. It was decided instead that rather than pass on  the saving to the taxpayer, that a “ward-specific” fund be established that would allow for minor capital expenditures in each ward—typically sidewalk repairs, playground improvements and the like. More recently all wards have been assigned ward specific funding budgets.

So staff were providing council with an update on what had been spent in the past year and what was left in the various ward accounts, when Clr. Arlene Vanderbeek zeroed in on the fact that each of the wards had been assessed $144,000 for “staff charges.”

She wanted to know what that was for and why the amount was the same for each ward regardless of how much money had been spent. Other councillors chimed in as well. Appearing uncomfortable, Staff offered to look into it and send councillors and email with the answer; but Clr. Brad Clark said no—the question was raised in public and the answer should be provided at a meeting of the committee.

The answer may lie in a cost accounting practice common to large multi-department organizations of charging costs back and forth between departments and projects. It is designed to provide a truer picture of the value that a department provides, but often can result in petty squabbles between departments all fighting to portray their department’s budget in the best light possible. The objective is to transfer operating costs to capital expenditures.

Perhaps the best example came when Donna Skelly was a relatively new member of council. What started out as a simple $325,000 proposal to add 26 visitor parking spaces and a new driveway opening to the parking lot at a Hamilton Housing project; escalated into a $1.1 Million project that saw various departments trying to shift costs to other departments. Suddenly, according to staff, expanding the parking lot was going to necessitate expensive alterations to traffic islands on Mohawk Road even though the current configuration had been in place for decades, and the plan was to lay all these additional charges against the parking lot project. They even hired a consultant to do a traffic study for $100,000 and charged  that to the parking lot project as well. Skelly didn’t win a popularity contest for exposing that particular boondoggle.

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