Taloyoak on the road to recovery More than $3 million in debt to be addressed over five years
Northern News Services
Monday, June 1, 2015
The Hamlet of Taloyoak is working on a deficit recovery plan but there have been a few bumps on the road to solvency.
As of March 31, 2014 the hamlet was $3.463 million in debt.
Ralph Ruediger, director of community development with Community and Government Services (CGS), explains ''no hamlet should carry a deficit.''
''If they do have a deficit in the end of a fiscal year they must put a deficit recovery budget in place to recover that deficit the following year.''
In Taloyoak's case, Ruediger says the hamlet had a staffing problem.
''I do know they had some difficulty with their finance director. They didn't have a proper person in place there to do the finances and they had a vacancy in the (senior administrative officer position), as well.''
The hamlet is responsible for developing its own deficit recovery plan. CGS approves it.
Senior administrative officer Greg Holitzki, who made the move to Taloyoak from Kugaaruk last summer, says the hamlet had an unrealistic plan in place when he arrived.
''I looked at the government when I got here and I said, 'Who made your deficit recovery plan?' How can you approve a deficit recovery plan when it won't get you out of debt,'' he asked. .
According to Holitzki, whose background is accounting, there were numbers in the plan that made no sense to him.
''How are you going to sell a building in the community for a quarter of a million dollars? It doesn't exist, a quarter of a million dollars. It's impossible. There isn't anything that's going to sell for a quarter of a million dollars up here.''
He says if a building sold for $50,000, ''you're doing well.''
''When I asked questions about numbers like that they said they were optimistic. You cannot be optimistic on a deficit recovery plan. If anything you have to be conservative.''
Holitzki is targeting many aspects of government funding agreements.
''You have to bring all your government agreements in line.''
He says in some hamlets there can be upwards to 30 funding agreements.
''There are so many agreements that were not monitored properly. And when you have government contribution agreements, a lot of them don't have a section in there for an administration fee.''
Holitzki says contribution agreements should not cost the community money. Ruediger agrees.
In the case of Community and Government Services, the department has made an effort to streamline its agreements and simplify reporting requirements.
''Sometimes they do have quite a few contracts,'' said Ruediger. ''A lot of these programs, if they can show that they're losing money on it, we advise them to seek additional funds with their funding partners. We don't believe municipalities should be funding the government.''
Holitzki also takes issue with the GN leasing space at ''really low'' prices.
''I had a gentleman call up and say, 'I get that same space in Grise Fiord for $500 a month.' I just said, 'Move to Grise Fiord.' They use things against one hamlet to gain power over another hamlet. That's got to stop.''
Holitzki had his finance person draw up total costs.
''This is how much we're charging you and this is the reason why we're charging you those rates. We have to get back the costs of what those offices cost the hamlet.''
But, ultimately, Ruediger says if a hamlet goes into a deficit it's because they're over-spending.
''So sometimes they have to make some hard decisions.''
In Taloyoak, some of those hard decisions means cutting expenditures that didn't even have a budget line.
''It's really easy for hamlets to spend money. It's Hamlet Day, we want to do this program. Let's spend $10,000 on prizes. But you don't have that in your budget. So you just spent $10,000 you didn't have. Do that for 10 years and that's $100,000 of deficit. How many of those do we have in a year? A lot.''
Hard choices include looking at reducing arena hours or reducing the propane purchase for the ice resurfacing machine, rather than cut prizes for Hamlet Day.
Holitzki, with the help of the hamlet council, is doing his best to explain the financial realities to residents, so they can understand the situation and why certain decisions are being made.
''We don't take away all the Christmas gifts from kids because we want to. We don't have the money to buy them. For years the hamlet has bought Christmas gifts for every child in the community. If you have no budget line for that, where are you going to get the money? Most communities have 300-plus kids.''
Hamlets have a maximum of five years to get out of a deficit position.
By 2020, Taloyoak should be out of debt.
''In the fifth year, we should actually have a surplus,'' said Holitzki.
Ruediger said hamlets generally all do manage to rein in their finances by the fifth year. Currently, eight or nine hamlets are on recovery plans, which is less than in the past.
''I think they're getting a little more in control than in the past,'' said Ruediger.