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Internal emails, according to the OSC, ran like this "how do we know that the trees that the forestry consultant identified are actually trees owned by the Company —i.e.: could they show us trees anywhere and we would not know the difference?" Another auditor replied, "I believe they could show us trees anywhere and we would not know the difference." With such evidence the OSC proceeded with only its third accusation of an Audit firm in its history.
Why is any of this of interest to Whistler? Ernest &Young just happens to be our municipal auditors. Not for a moment am I suggesting there could be a problem here but I am worried that auditing can trick us into believing one thing when reality might be something else.
At times auditing can miss the true liabilities of a client's balance sheet as it concentrates on minutiae, which is irrelevant in the total picture.
For example, is the time that municipal employees have accumulated with sick days not taken but accumulated as a future benefit recorded on the balance sheet? Are we providing adequately for the depreciation of the $400 million in assets our muni apparently has in its pocket? And most importantly, what happens if the assets of the pension fund of the municipal employees are unable to support the promised benefits?
The Fund must return six per cent plus per annum to meet its obligations, however, with equity markets stagnant and interest rates at record lows twinned with the fact that retirees are living a lot longer than originally anticipated, most pension funds are falling far short of their obligations.
An explanation is in order. Government employees receive their pensions based on years of service and salary levels of their best years near the end of their term of employment. This is called a defined benefit plan. Actuarial assumptions assumed these plans would earn at least six per cent plus per annum, however, financial markets have not been as kind as the assumptions and most plans are deeply in the red. Corporate Canada has reacted by closing such plans to new employees and showing their deficits publicly.
So how can the Canadian governments continue to offer this largesse to their employees?
It's simple, to-date they have ignored the massive costs, which will be forced upon you as taxpayers when the chickens come home to roost. Their books are about as opaque as Sino-Forest's when one considers the reality of the future possible costs which they have taken on our behalf. Greece collapses and California municipalities go to the wall with very serious consequences and primarily due to overly generous pension plans.
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