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In the last post, #2, I summarized the key Town of Parry Sound expenditures for 2011, and noted that there was a $1.8 million gap between the listed revenue and expenses. In this post we will look at that difference and get the difference down to zero, as is required with a balanced budget.

Well nothing is as simple as looking at expenses and revenues and expecting them to balance. As it turns out these expenses also include significant capital asset amortization expenses, about $4.6 million, that impact the balance sheet and a balanced budget, but not simple cash flow. In addition there were a large number of capital expenses in 2011 that similarly did not hit the expense side of the ledger. These capital investments amounted to about $7.2 million in 2011 and included new municipal office costs, road repairs, Canadore College costs, and water service capital expenses. Combined with the $1.8 million gap noted earlier, the difference in ‘cash out’ reaches about $4.4 million ($1.8 million + $7.2 million – $4.6 million). This is $4.4 million ‘in the hole’.

Now to bring this figure to zero, a balanced budget, we need to come up with $4.4 million in additional funds. These figures came from a variety of sources, most notably reserves. Reserves are created exactly for this purpose, to cover the costs of expensive capital items that have an appreciable lifetime. The total amount taken from reserves in 2011 was about $2.1 million, which leaves a deficit of about $2.3 million. This apparent deficit was reduced by $0.9 million in capital asset disposal (I’m not sure what was sold) and another $1.7 million that was in the municipal office building fund (presumably financed). We now have a positive balance of about $0.3 million, but zeroes out when we add in some additional revenues not noted earlier, an opening surplus of $0.3 million, and back out some money transferred to reserves ($1.4 million).

I hope I have not made this too confusing. As you can tell I am not an accountant. The way I look at finances is pretty simple. I like to look at what revenue was received, how much was spent, and how much we added or withdrew from our savings account (reserves). This simple approach provides a good start to understanding where revenue can be improved and expenses better managed. What hasn’t been discussed so far is how much debt we are carrying as a town. I’ll look into this in a future post.

The next post will take a more detailed look at 2011 town revenues which were briefly summarized in the first post.