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GOVERNMENT FINANCE OFFICERS
ASSOCIATION, ALBERTA CHAPTER
The only way you can stay
on top is to remember to
touch bottom and get
back to basics.
Shane Black
American Screenwriter
In This Issue
• 2018 Conference Update………..……..Page 1
• Professional Development 2017...Page(s) 2-5
• PSAB Exposure Draft………………….Page 6
• Conference Photo Highlights………….Page 6
• 2017 WGFOA Conference ………Page(s) 7-8
• Shared Document Database………….Page 8
• Economic Update………………..Page(s) 9-11
2018 Conference
June 3-6, 2018 Delta Lodge Kananaskis
“Back to basics...public consultation and engagement”
Conference Registrations and hotel bookings will open in September 2017
STAY TUNED!!!
GFOA Newsletter Summer 2017
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Typically our workshop locations are found along the Highway 2 corridor for ease of travel and convenience.
Should a municipality desire to have one of our workshops held at their location and can find enough interest in the area, please contact [email protected] for consideration. Go to the website: https://www.gfoa.ab.ca and click on the Events tab for all the workshop details or to register today.
Please contact [email protected] with any questions about the workshops listed.
Additional new workshops for 2018 are in the planning stages.
Watch for announcements of these new PD sessions.
Professional Development for 2017
Dates Locations Member Rates Non Member
Rates
Budget Analyst Academy
September 13-15, 2017
Best Western Plus, Leduc $1,200 $1,500
Preparing Audit Working Papers
September 22, 2017
Best Western Plus, Leduc $325 $375
Preparing Audit Working Papers
September 29, 2017
Best Western Plus, Lethbridge $325 $375
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Budget Analyst Academy
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Next Newsletter to include…
Economic Update Q3
2018 Conference Registration
Workshop Updates
2017 Conference Survey Results
NEW Member Highlights
Budget Analyst Academy
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Preparing Audit Working Papers
Learn the most efficient and effective ways to prepare working papers, NOW WITH GST OPPORTUNITIES AND PITFALLS FOR MUNICIPALITIES.
WORKSHOP OBJECTIVES:
To train municipal staff in preparing effective working papers for the annual audit in a way that minimizes their time and effort, while providing the auditors with exactly what is needed to perform their audit effectively. To provide municipal training staff with information related to possible GST opportunities and pitfalls within their organization.
WHO SHOULD ATTEND:
Local government staff who are responsible for, or participate in the preparation of audit working papers.
BENEFITS OF ATTENDING:
Participants can expect to:
Gain an understanding of what is required of them by their auditors. Learn best practices in preparing audit working papers. Save time in preparing for the audit. Make use of advice from auditors. Avoid extra audit fees caused by incomplete preparation. Learn about possible GST opportunities and pitfalls within their organization.
The Course Will Cover:
Purpose and benefits of an audit
Components of an audit
Working papers for assets and liabilities
Working papers for revenues and expenditures
Time savers
Managing cut-off
Retention policy
GST opportunities and pitfalls
These topics will be presented in a one-day session utilizing a mix of presentation and group discussion. It is strongly encouraged for you to bring your laptop as all of the materials and exercises will be in electronic format.
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Dear Members;
RE: PSAB EXPOSURE DRAFT REVENUE, PROPOSED SECTION PS3400
On May 1st the Public Sector Accounting Board (PSAB) issued an Exposure Draft that proposes a framework describing two categories of revenue – exchange transactions and unilateral transactions. We encourage members to submit their comments on the proposed new framework which can be found at :
http://www.frascanada.ca/public-sector-accounting-board/index.aspx
Before the August 15, 2017 deadline.
Some fun photo highlights from the 2017 conference
Please note: 2017 Conference Session Presentations have been uploaded to the website. Members will need to Login to gain access to the Members Only page and then click on Conference Downloads to access the presentations available.
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“Measuring Success: A Finance Perspective”
Regina, Saskatchewan September 12th to 15th 2017.
GFOA of Western Canada has been putting on conferences annually since the
1970’s. We concentrate on finance issues that impact all provinces and general
deal policy issue like accounting standards, budgeting, risk management and
performance measurement.
This year’s conference will feature great training and development opportunities in
the areas of PSAB standards, Performance measure-
ment and the role of the Finance officer.
Our speakers include:
Karina Leblanc who played soccer for Canada for nearly
18 years culminating in a Bronze Medal at the London
Olympics in 2012. And is now a proud UNICEF Canada
ambassador – ready to inspire young girls to live their
own dreams. distinguished speakers who will explore
the role of the finance officer in organizations and in life.
Craig Reynolds of the Saskatchewan Roughriders, a CPA who was successful as
the CFO of the most commercially successful football team in Canada and is
President and now Chief Operating Officer.
Ed Harrington past president of GFOA of US and Canada, and now an adjunct
professor at the University of San Francisco and a board member of Greenpeace
International.
Dr. Jim McDavid from the University of Victoria, one of Canada’s leading public
administration scholars in the fields of program evaluation, performance measure-
ment and management.
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Pre-conference sessions are being offered on September 12th as follows:
Business Case Analysis - GFOABC
Advanced CaseWare Workshop – FH Black and associates
Asset Management - Latest Best Practices – MFOA
Our activities include:
Welcome Reception at the RCMP museum which brings to life the incredible story of
the RCMP and its role in the development of Canada.
Thursday night Banquet at the historic Hotel Saskatchewan, one of Canada's grand
railway hotels located in downtown Regina, Saskatchewan, overlooking Victoria
Park.
Please check out more details and registration information at our website:
http://westcangfoa.ca/
We need your assistance
https://www.gfoa.ab.ca/member_home.php
The GFOA website hosts policies and Request for Proposal (RFP) documents, see
the Members Only Section (click on "Shared Document Database"). Please assist
GFOA by uploading your RFP's to the website or send them to Candace Coambs
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Overview & Key Themes
The theme of this outlook, as you can imagine, will be the Bank of Canada’s (BoC) recent rate hike. Markets were not shocked, as the increase was widely anticipated. With one rate hike on the books and the BoC signaling that it won’t wait too long for a follow-up move, our attention for this outlook will turn to the economic effects of a rising interest rate environment. A few key themes we will focus on are:
Gradual decline of the dollar
Gradual rising inflation
Rising interest rates
Continued economic growth
Should we fear a rising rate environment?
Currency and Inflation
With the BoC hiking rates earlier than previously expected, we’ve upgraded our forecasted flight path for the loonie. Nevertheless, soft inflation and a desire to lag the U.S. on rates will keep further doses coming at a measured pace, pushing the loonie gradually weaker from current levels. We have also upgraded our Canadian outlook, with the sec-ond quarter almost matching the blistering Q1 pace; this year is slated to see 2.8% GDP growth, strong for any developed nation. Inflation estimates have been kept fairly conservative as certain components of the CPI basket that measure inflation, such as housing are keeping, estimates low. We do see inflation rising gradually over the coming year.
Alberta
Alberta's economic recovery has been broad based and moving at a steady clip. Our province still has the highest level of disposable income per capita in the country. Year-to-date retail sales increased 6.9% to a level approaching the pre-recession high in October 2014, while manufacturing shipments have recovered nearly two thirds of the losses incurred during the downturn. Although still elevated, the labour market continues to show signs of gradual improvement. June's unemployment rate slid to 7.4% from 7.8% in May, and job growth is now tracking a 2.2% pace on an annual basis. Housing starts are forecasted to grow from last year’s 24,500 units to 28,000 units in 2017. This is positive news for Alberta. However, the overheated housing markets in both British Columbia and Ontario are projected to decline through next year.
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Calgary
The gradual recovery is evident in Calgary's housing market as Q2 activity continues to show improved supply-demand balance and modest price growth. In June, the benchmark price was $441,500, 0.85% higher than June of last year. Both the sale-to-new listings ratio and months of supply have been on a downward trend since the start of 2017. Non-residential building construction invests totaled $903.4 million in the second quarter of 2017, down 4.5% from the first quarter.
Edmonton
Average home prices in Edmonton continued to show consistency. The average sale price in June was $398,341, a 5% increase from a year ago. The median sale price was $362,000, an appreciation of less than 1% from last year's levels. The number of building permits was down in 2016, but the value of residential and industrial construction totaled $8.02 billion, up from $4.8 billion in 2015.
Putting it all together – Should We fear a Rising Interest rate Environment?
A gradual decline of the dollar, stable inflation, stable housing and rising interest rates. What does this all mean and how does this effect municipalities? We approach this question from two viewpoints: borrowing and investing.
Borrowing
Variable lending rates are on the rise. To fully understand the impacts of rising rates on borrowing we have to as-sess the total debt market. Consumer spending is likely to soften due to increased debt payments, while the pace of growth in mortgages outstanding, is expected to slow down as an impact of higher rates.
The ability of the BoC to impact credit demand via lower interest rates in recent years was compromised by the fact that the easing took place from an already low level of interest rates. Today, the opposite is the case. The low starting point is enhancing the Bank’s impact. The effective interest rate on all household debt (that is interest payment as a % of total debt) is just under 4%. A full percentage-point increase in that effective rate will cost borrowers more than $20 billion a year in additional debt payment cost. That could potentially translate to 1.3% of forgone consumer spending. What this all means is there is a large increase in sensitivity between consumer spending and policy changes from the BoC.
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The potential damage due to policy overshooting is notably higher today. And that’s where the risk resides. Too se-vere rate-induced slowing in consumer spending and real estate activity could be recessionary, and eventually turn the growth story into a credit quality story. The BoC is not oblivious to this fact, and even acknowledged when it hiked recently, that consumers are more sensitive to interest rates in this cycle. Our working assumption, therefore, is that the disease is also the cure, and that the increased sensitivity to higher rates will prevent the Bank from mov-ing too rapidly.
Investing
Lately, we are noticing an increasing wave of worry concerning the interest rate increase from the BoC. Individuals and institutions alike are voicing their fears about what this hike means for the bonds in their portfolio. As strong ad-vocates of fixed income, we want to respond to these concerns with a case study of historical periods of rising rates. Dimensional Fund Advisors conducted a case study to examine whether shorter-term bonds outperformed their longer-term counterparts in various rising rate environments. As you can see below, the short-term index only sig-nificantly outperformed in one circumstance, a time when interest rates spiked over an unusually short time frame. Thus, if short-term fixed income does not consistently outperform in rising rate environments, it is unwise to com-pletely rule out the higher yields of longer-term bonds.
The primary concern for bond holders with regards to the BoC’s announcement is interest rate risk. This refers to the inverse relationship between interest rates and bond prices – as rates rise, prices fall. To combat interest rate risk, it is essential to utilize tools and strategies, such as laddering maturities, that are designed to protect capital and act as a hedge against inflation. Additionally, there are numerous investments available that are designed to outperform in an inflationary environment while maintaining principal protection. A decrease in bond prices should actually be a cause for celebration; rising rates allow us to reinvest cash flow and maturities at higher rates over time, enhancing our overall return in the long run. Furthermore, higher rates also create more opportunity to in-crease investment returns by investing surplus cash flow. The average expected return on our laddered strategy is now north of 3.00%, a marked improvement from the lows of 2015.
Sources: Bloomberg, Statistics Canada, U.S. Census Bureau, BCA Research, CREB, EREB, CHBA, Alberta Treas-ury Board of Finance, CMHC, Data and Statistics Office & Data provided FTSE TMX, CIBC World Markets Inc.
Todd Poland, CIM, PM, First Vice-President, and Investment Advisor at (403) 260-0412,
James Hobson, CFA, PM, Investment Advisor at (403) 260-0574 or 1 (800) 665-6864,
Charet Chahal, CIM Investment Advisor at (403) 260-0440
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2017. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. Todd Poland and James Hobson are Investment Advisors with CIBC Wood Gundy in Calgary The views of Todd Poland and James Hobson do not necessarily reflect those of CIBC World Markets Inc. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.