It appears the majority of city council is backing the call for an internal audit in light of the deficit forecast requiring more than $1 million in budget cuts.

Council approved the cuts at its meeting Monday night.

Earlier, three of the five members present expressed serious concern with what Coun. Dave Austin described as an emergency funding crisis for the city.

Council went on to accept a recommendation from Coun. Ranj Pillai that the city immediately entertain a full-scale audit by an independent third party.

The city, said Pillai, owes a full accounting to the taxpayers, as there are questions of accountability and trust that need to be answered.

The councillor said the Hillcrest Community Association, for instance, is very upset that the city is cutting the funding earmarked for design and reconstruction planning.

The city needs to establish a communications strategy to ensure organizations and groups affected by last night's austerity measures are aware how they it will affect them, Pillai said.

Of the $1.12 million in cuts approved last night, $805,000 will go toward offsetting unexpected costs associated with wages and benefits, and $320,000 will be set aside to cover any repair cost to the Canada Games Centre not covered by fire insurance.

It's expected $206,000 will be saved in wages from a hiring freeze on casual staff for the rest of the year, and not filling positions left vacant by staff leaving the city or going on holidays.

In addition to the savings from wages, the hiring freeze is expected to generate an additional $65,933 in savings from benefits.

The different city departments have also been asked to save and $126,000 through other means, from office supplies to non-essential equipment replacement.

Another $700,000 is coming from a variety of savings, from $55,000 in playground equipment to $70,000 in fire hydrant upgrades.

The city's 2011 budget is $97 million: $63.4 million for operating and maintenance and $33.6 million for capital projects.

Council has been told by senior administration the deficit forecast is based on the regular financial review following the end of June and the first six months of the new budget year.

The primary cause of the financial situation is the implementation of the city's new job evaluation system which maintains the principle of equal pay for work of equal value, senior administration has explained to council.

After negotiations broke off with the two largest unions in June 2010, the city asked the Yukon Human Rights Commission to provide its interpretation of requirements contained in the new job evaluation system. It received the response last Christmas Eve.

Rob Fendrick, the city's director of administrative services, explained to council last week during committee discussions when the city received the commission's interpretation at the 11th hour, it was much too late to build in revisions for the 2011 budget. The city had already put away $1.1 million to cover off increases anticipated under the new evaluation system, though the cost of the new system, coupled with the new collective agreements signed off earlier this year was closer to $2 million.

"This is a very rare event,” Fendrick told council last night. "I was kind of a perfect storm.”

But both Austin and Coun. Doug Graham suggested last night the city has been robbing Peter to pay Paul for too long, and now it's catching up.

Graham said he absolutely does not like the thought of using money budgeted for road work and other capital projects to cover off shortfalls in operating expenses.

The city has approximately $15 million in reserves but it should have $20 million, Graham said.

Austin suggested it is a losing proposition when you redirect capital funding because it was identified as a requirement in the first place.

Sooner or later, Austin told his colleagues, the road will have to be repaired or the playground equipment replaced.

It's especially unacceptable if there are issues of safety at hand, like the cut to $30,000 in guide rail installation, said the councillor.

"My question is: why can't we take $805,000 out of emergency funding and get on with doing the work and then get on with rebuilding the emergency reserve?”

Fendrick assured members of council nothing related to safety is being compromised. He noted last week the items being postponed will be back as priorities for consideration in next year's annual budget.

Council did support Pillai's suggestion to bring forward a discussion regarding going forward with an internal audit by an independent accounting firm to review the city's financial management practice.

The audit might very well show everything is just fine, but whatever it turns up should be in time to take into consideration as members of council sit down to chew over the 2012 budget, he insisted.

In his remarks last week, Pillai noted the city is consistently facing deficit forecasts that require mid-year adjustments to balance the books by year-end.

The councillor also pointed last week that this year's deficit forecast comes even as the city received $200,000 more than expected in its annual grant from the Yukon government, and an additional $140,000 in revenue from building permits.

Rather than having the additional revenue available to consider offsetting anticipated tax hikes next year, the city is again riding the rails of another deficit forecast, he said during last week's committee of the whole discussions.

City council implemented a four per cent hike in property taxes this year, and has indicated the same will be required in 2012 and 2013.

By Chuck Tobin

Star Reporter