In a press release the city claims nearly $5 million is unaccounted for
Chestermere City Council directed administration to investigate alleged financial irregularities involving the former Chestermere Utilities Incorporated (CUI) company.
Findings of financial irregularities were presented to council during the July 19 CUI dissolution public hearing.
Council accepted the dissolution of CUI and directed city administration to hire outside experts to begin an investigation into the accounting practices of CUI, pending the company’s final dissolution, with details of the irregularities being submitted to the Ministry of Municipal Affairs, a City of Chestermere media release said.
“All aspects of this investigation into the financial irregularities at CUI, that have been identified by staff, will be made public. We promised to govern with transparency, accountability and integrity and that is what we will be doing. I hope current councillors who sat on CUI’s board and management team will assist in the investigations,” Mayor Jeff Colvin said in the release.
“CUI financial irregularities need to be investigated before it can be completely dissolved by the end of 2022,” Ann Thai of Finance Corporate Services said during the public hearing. “Get the explanation for the irregularities and explain clearly what happened over the years.”
The key financial irregularities that will be investigated before the company is completely dissolved by the city include irregular city transactions that are shown as city expenses, and about $4.2 million that is unaccounted for in retained earnings, the release said.
Accounting practices showing the city crediting CUI equity for the company’s losses amounting to $3.8 million in 2017, $700,000 in 2018, and $2.5 million in 2019 and 2020 will also be investigated.
The 2021 CUI financial statement showed a loss of $235,000, a profit of 2.4 million, and a rate swap for cash with the city for $835,000. The remaining $600,000 is unaccounted for and will be included in the investigation.
Lastly, cash in the bank for CUI in 2021 was $1.5 million, by the end of the year it was $6.6 million. The $4 million was cash in the bank and the balance of $2.6 million is in a restricted cash account, the release said.
“Council also wanted to know why the financial irregularities were not flagged by the city’s auditors over the last 10 years,” the release said.
CUI was incorporated in 2010, and began operations in 2012 to be a utility company, and move utility debt from the city by allowing the city to have a higher borrowing capacity, Thai explained.
Chestermere residents began a petition to dissolve CUI and investigate high utility rates. By 2019, the CUI building was closed, with the city continuing to operate business, and renaming CUI to 1538974 Alberta Ltd. In November 2021, city council directed administration to completely dissolve the company.
“The request made by the new council was to continue its mandate for transparency, and they were also not comfortable with having a numbered company to hide debt,” Thai said in the public hearing presentation.
The advantages of municipalization include the utility service officially becoming a city service department, allowing the department to potentially be subsidized, one set of financial statements will be produced, quick response time to customer service inquiries and future decisions will be made in a public forum, Thai said.
