Penticton City Hall

Accounting oversights led to millions of dollars’ worth of capital projects undertaken by the City of Penticton over the last two decades being billed incorrectly within the municipality’s internal accounts, elected officials heard Tuesday.

The errors were discovered by city staffers during a review of development cost charges, which are levies placed on new construction to fund things like roads, sewers and parks.

While the funds are supposed to be held in various reserve accounts until such time as the money is needed for capital projects or interest payments on loans for capital projects, that hasn’t always happened.

“During this (review) process, a number of items were identified that were approved through prior council motions to be funded by DCC reserves or were DCC eligible, however, were not fully implemented,” said Angela Campbell, the municipality’s finance manager.

All of the money is accounted for, though, and there are no suggestions of impropriety on the part of city staff. Rather, some projects were not expensed to the correct DCC reserves, some were funded by borrowing from other DCC accounts and not paid back, and others were paid out of operating expenses because there wasn’t sufficient money available in the proper DCC account when needed.

To clean up the mess – the cause of which was not discussed by council – Campbell recommended a series of one-time adjustments and ongoing payments within the city’s accounts.

“The total overall adjustments to the DCC reserves over the next 20 years is estimated at $20 million, with approximately 66% of the transfers occurring over the next five years,” said Campbell, who warned that “should these adjustments not be approved by council, utility rates for water and sewer will be impacted with required rate increases for future borrowing needs.”

Campbell is forecasting the city’s DCC reserves to fall from a total of $19 million at the end of 2020 to $13.4 million by the end of 2026 as a result of the cleanup.

Council voted unanimously to go along with Campbell’s plan.

Her review resulted from efforts led by Coun. Frank Regehr to raise DCC rates, which hadn’t increased since 2007 prior to a 25% hike earlier this year.

Expenses that were incorrectly billed through the DCC program date back as far as the 2003 construction of a water booster station on Holden Road and the city’s 2004 purchase of land on Munson Mountain.