'Spending like drunken sailors': How the RM of McKillop got into such a financial mess

A ratepayers group from the Rural Municipality (RM) of McKillop says the taxes of many residents more than doubled this summer because the local council's spending has been "out of control."

Howard Arndt, the Reeve, acknowledges there are financial problems but he blames them on others. Bob Schmidt, a ratepayer who leads a protest group, said this is typical behavior from the Reeve.

"It's always somebody else's fault," Schmidt said. "It's never his or his members of council, his voting bloc's fault.

"He's ultimately responsible for the fiscal wellbeing of the RM. He's the one who's responsible and he's trying to deflect that."

'We saw the poor management practises, the bad decisions that were being made. It was just as though they had no control.'- Bob Schmidt, Ratepayers protest group

In August, many homeowners in the RM, which is about 60 kilometres northwest of Regina, received notice that their taxes were soaring. Protests erupted, prompting the provincial government to take the unusual step of launching a review of the RM.

That review is complete and the province has confirmed the report will be publicly released Thursday.

Administrator defends her actions

Arndt blamed the hikes on the RM administrator.

He told CBC that the administrator, Michele Cruise-Pratchler, failed to let the council know that it was massively overspending.

Arndt said the RM council didn't discover there was a problem until they were finalizing the 2018 budget this summer and realized they were more than $1 million in the hole.

"We were not being told that there was a financial problem that we could have adjusted for so we didn't get into as bad of a situation as we're in," Arndt said.

He said their only realistic option was to jack up taxes, which sparked protests. In the midst of those protests, council dismissed Cruise-Pratchler.

"I lost confidence in her abilities in providing the information and doing the job that we required of her," Arndt said.

Cruise-Pratchler said in a letter to council, presented just before she was fired, that she felt she was "being made into a scapegoat in this matter." 

She said she is not responsible for the RM's deficit and she insisted she kept the politicians fully informed.

"I have provided council with monthly financial reports each of which has indicated rapidly rising expenses," Cruise-Pratchler wrote in the August 15 letter obtained by CBC. "The Finance Committee has had full opportunity to review the individual invoices that have been approved for payment."

"There is absolutely nothing that is hidden from council."

Arndt acknowledges Cruise-Pratchler may have provided documents to council but he said more is required. He said she should have explicitly spelled out the problem.

"We can see rapidly increasing expenses but unless it's flagged and [she] says 'Whoa just a minute here. My forecast says that you are going to be short dollars or potentially short dollars' we would not know that," said Arndt.

Cruise-Pratchler didn't respond to CBC's messages requesting an interview.

"Rapidly rising expenses"

Schmidt says despite the finger pointing, it's not hard to see how the RM got into this mess.

"Well just by overspending and spending like drunken sailors," he said.

Here's a list of some of what the RM spent during the first six months of 2018.

• $16,500 on DC Strategic Management to investigate ethics complaints against Reeve Arndt. Arndt said ratepayers have made several ethics complaints against him for things he has said. "The reality is what I said is what I said and I believe it to be true. The fact is that the complainant in my opinion just didn't like what I was saying," he told CBC.
• $159,000 for Rasmussen LLP, the RM's regular legal counse. Arndt blamed the high bill on a small group of troublemakers in the RM. "Every time we have an appeal we have to bring in lawyers. Every time we have a lawsuit filed against us we have to bring our law firm." He said one of the troublemakers is a councillor "who has absolutely no shame when it comes to doing whatever he can to disrupt our council meetings bringing forth information that is incorrect and it was holding things up significantly so we have been bringing a lawyer into our council meetings as well so when these kinds of things come up they can be dealt with right away."
• $152,000 for Urban Systems, a consultant hired to examine development costs. Arndt said they were to answer the question "how much time was being spent on development, how much is that worth?"
• $31,000 for Brownlee LLP, a law firm hired to help the RM deal with a private development in the municipality that ran into serious financial problems.
• $6,000 for Gord Krismer and Associates, municipality bylaw experts, to assist in bylaw appeals.
• $10,500 for McNair Business Development for consulting. Arndt said McNair was hired to review "what it's costing us to do specific tasks so that we can say this is the money that is spent specific to this part of our business or that part of business or another part of our business."
• $15,000 for HJ Linnen Associates, a communications firm. Arndt said this was necessary because "none of us are communication people."
• $5,500 for Mackay Criminal Defence LLP, a legal firm hired to defend administrator Cruise-Pratchler from criminal complaints lodged by RM ratepayers. No charges have come from those complaints.

Arndt told CBC "we're not happy with what has happened and the spending that we did is not normal and it's not what we intend to do into the future." 

"It was out of control," said Schmidt. "We saw the poor management practises, the bad decisions that were being made. It was just as though they had no control."

Schmidt also complained that the RM paid Cruise-Pratchler $83,000 for half a year's work, the equivalent of $166,000 a year, which he describes as an "ungodly amount." He said that is equivalent to the salary of an Assistant Deputy Minister in the government of Saskatchewan, a position often responsible for millions of dollars and hundreds of employees.

Arndt said that Cruise-Pratchler was a contractor so that amount includes expenses. He also said the RM of McKillop is a complex organization to run because it contains 20 hamlets and therefore is not an average RM.

Mysterious moving money

Cruise-Pratchler isn't the only RM of McKillop administrator who Arndt laid blame on.

At a public meeting in mid-August, Arndt told angry ratepayers that part of the fault for the deficit rests on the RM's previous interim administrator, Crystal Mytopher. He said she made a "rookie mistake" in the summer of 2017 by withdrawing about $488,000 from a term deposit fund that was supposed to be used to pay off an RM lagoon project. 

Arndt claimed Mytopher moved the money out of the dedicated account and into general revenue.

"That was an error by Crystal," he told the crowd. "The administrator looked at that and said 'Oh that's not dedicated to the hamlets' and she accessed it." CBC reached out to Mytopher but she declined an interview.

One protester at the meeting shouted "that is a duty of council. Don't throw it off to subordinates." 

I just cannot believe that he would not do his due diligence and ask a question about why are we doing this.- Bob Schmidt, Ratepayers protest group

Arndt said he and the other councillors saw that money sitting in general revenue and didn't realize it had been withdrawn from the term deposit, and so they spent it. Arndt told CBC that he learned of Crystal's mistake just a few weeks ago and now the RM has to pay back that fund by jacking up taxes.

Further investigation revealed Arndt himself likely played a role in moving that money.

Reeve likely signed off on fund transfer

By policy, money in a term deposit account can't be removed without two signatures: the administrator's and the Reeve's or deputy Reeve's.

Arndt admitted that he likely approved the decision to remove the money from that dedicated lagoon account.

"There's no doubt in my mind that if there are two signatures on it one of them is mine," he said.

He said that if he signed it, that was a mistake, but one that wouldn't be his fault. He would have just been doing what his administration asked him to do, he said.

"I was outraged when I found out that I was asked to do that," he told CBC. "Because those dollars are dedicated."

When asked whether such a large figure — almost half a million dollars — would prompt him to look closer at a transfer before signing off, Arndt responded that if it was a cheque to one individual he probably would examine it, "but if it's a half a million dollar cheque from one municipal account to another, no. I don't know why I would because it's staying within the municipality."

Schmidt said that's not acceptable.

"I just cannot believe that he would not do his due diligence and ask a question about why are we doing this," said Schmidt. 

Arndt says in the future he'll be more vigilant.

"I will be checking that more closely now," he chuckled.

Which administrator moved the money?

There's also another aspect of Arndt's story about that money transfer that may not hold up.

He has publicly said the money was transferred by Mytopher. But an RM financial statement seems to show that the money was still in the lagoon account one month after Mytopher was no longer the RM's interim administrator.

Mytopher served from June to August 2017.

An October 2017 financial statement ending September 30, 2017 seems to indicate there was still $448,000 in that term deposit account. Oddly, a previous financial statement from July 2017 seems to show the account as empty.

When CBC asked Arndt about the September report he said he had just seen it recently and agreed it raises questions about his story of who moved the money.

He now says it could have been Mytopher or Cruise-Pratchler.

"Right now I have reason to doubt my own memory obviously, so I don't know," said Arndt.

"We have some checking to do," he told CBC weeks ago. "We've got to go now and look at the bank account and see when it was actually moved."

To date, he hasn't told CBC what he found. He insists no money has gone missing. 

"I have no reason to believe that money has disappeared and I'm not swerving on that one right now," said Arndt. "It's 'what was the timing' and 'are the reports correct?' That is the issue."

In her letter to council, Cruise-Pratchler said she wasn't responsible for moving the money, insisting it was moved at a time when she wasn't employed by the RM. 

Financial troubles could have been avoided: critic

Schmidt, the protest group leader, said this all could have been avoided if only council had acted on petitions by concerned citizens a year ago.

He said last August he and other residents saw the RM's financial troubles mounting. They submitted petitions calling for forensic and management audits of the RM.

The majority of council concluded those petitions were invalid so the audits weren't done.

"Had we had that chance to run that audit last year we would have probably saved the RM from being in the financial shape it is right now," Schmidt said. "Because we would have got it before the massive amount of spending took place."

Arndt dismissed Schmidt's claim. He said most of the financial problems happened after the petitions were submitted.

He said those residents shouldn't be impressed with their apparent foresight.

"They happen to be lucky in that what they were suggesting was happening — that there was an issue — was an issue," Arndt said.