FINANCE & ADMINISTRATION REPORT: BUDGET VARIANCE AND PROJECTS UPDATE REPORT TO DECEMBER 31, 2022
Executive summary and discussion of the Town's financial performance and capital project status as of the end of 2022.
TOWN OF VIEW ROYAL FINANCE & ADMINISTRATION REPORT
TO: Committee of the Whole FROM: Steven Vella, Manager of Accounting DATE: January 4, 2023 MEETING DATE: January 10, 2023
BUDGET VARIANCE AND PROJECTS UPDATE REPORT TO DECEMBER 31, 2022
RECOMMENDATION:
THAT the report titled “Budget Variance and Projects Update Report to December 31, 2022” from the Manager of Accounting be received for information.
PURPOSE:
To provide Council with information regarding the financial results of operations and progress of projects to December 31, 2022.
TIME CRITICAL:
Staff provides Committee with a Budget Variance and Projects Update monthly to provide greater detail and analysis to supplement the Budget Variance Dashboard available at viewroyal.ca.
EXECUTIVE SUMMARY:
Year-to-date revenues and expenses are within expected variances with some exceptions as outlined in this report. The Town of View Royal is on track to exceed its revenue targets, however most of this excess revenue is not available for increased operational spending as it will be offset by increased transfers to reserve or will be deferred to 2023. Expenditures are within expected ranges, allowing for timing differences and year-end adjustments, except as detailed in this report. The values provided in this report are subject to change until finalized for the published financial statements.
Several capital and non-core projects are in progress or not started. Timing differences between work completed and invoice processing create a discrepancy between costs as currently displayed and final project costs. Further details about capital and non-core projects can be viewed in the Budget Variance Dashboard at viewroyal.ca.
BACKGROUND:
On May 3, 2022, Council adopted Financial Plan Bylaw No. 1096. This report reflects budget values for revenue, expense and projects as presented in the Town’s 2022-2026 Financial Plan. The Budget Variance Dashboard provides additional views of the same budget information. The attached schedules inform Council of the financial results of delivering services and capital and non-core projects to the end of 2022 with prior year actual values for comparison.
Interested constituents can access the Budget Variance Dashboard through a “Quicklink” on the landing page at www.viewroyal.ca. The Budget Variance Dashboard includes information about the status of both non-core and capital projects along with related operating budget and spending to date. The Dashboard displays year-to-date values (YTD) for the current year and up to four prior years’ comparative values and is updated weekly.
Please note that the year-to-date values provided are subject to change until finalized for the published financial statements. Also, the values in the dashboard may not match those on the attached consolidated reports, as the dashboard reflects segmented operating revenue and expense and specific project financial information, rather than the full consolidated budget.
DISCUSSION:
Consolidated Budget Variance and Projects Update Report
Revenues and expenses to date are within expected variances, with the exceptions and comments noted below.
Consolidated Revenue
Schedule A – Consolidated Budget Variance shows revenue on a consolidated basis, which means that both operating revenue and capital sources of funding are added together in the same format as shown in the five-year financial plan bylaw. Sixty-four percent or $17.2 million of the total 2022 budgeted revenue and transfers comes from operating activities. At December 31, 2022 over $18.7 million (108.7%) in total operating revenue has been received or is receivable, putting View Royal on track to exceed its total revenue target. However, most of the excess revenue is offset by increased transfers to reserve, meaning that this revenue is unavailable for increased operational spending. The following table identifies some exceptions and related explanations.
| Revenue Type | Actual | Budget | Variance | Explanation |
|---|---|---|---|---|
| User fees | $2,960,901 | $2,979,060 | 18,159 | The user fees variance is a result of sewer user rates being intentionally set lower than originally budgeted due to reduced cost estimates. Both sewer and garbage collection services are projected to end the year with a small surplus. |
| Sales of services | 1,456,573 | 846,695 | (609,878) | Building and other permit revenue is $584,069 higher than expected for the year, however, if projects are not completed by year end, it is likely that most of this excess revenue will be deferred to 2023. |
| Penalties and fines | 104,243 | 60,000 | (44,243) | In Q3, the 10% late payment penalty on taxes was nearly 43% higher than predicted by the budget, contributing $18,000 to this variance. Rising interest rates has resulted in higher interest on arrears taxes, contributing an additional $17,600. A significant tree removal violation contributed to a $5,000 positive budget variance in fines and tickets. |
| Investment Income | 421,013 | 115,000 | ($306,013) | Operating revenue includes interest on bank accounts only and excludes net gains/losses on reserves investments. This will be finalized at year-end and reported in the 2022 financial statements. Due to the volatility in investment markets, staff anticipates the current positive variance could be significantly offset by investment losses by the end of 2022. |
| Gov’t grants and transfers | 2,688,447 | 2,666,440 | (22,007) | Casino revenue to date totals just over $1.5 million, exceeding the 2022 budget projection by $16,000. Casino revenue is transferred to reserves per policy. This positive variance is primarily offset by a shortfall in unclaimed conditional grants ($158,000). Unconditional grants positively contributed to this variance due mostly to an unanticipated Climate Action Program grant ($112,000) and additional Small Community Protection Grant funds ($69,000) from the Province. |
| Contributions from developers and others | 629,000 | 95,000 | ($534,000) | Community amenity contributions contributed $623,000 to this variance and are transferred to reserves, per policy. Funding for the Active Transportation Plan has not yet been accrued ($95,000). |
| DCCs, transfers, and internal cost allocations | 533,626 | 9,623,830 | 9,090,204 | These items relate to entries that typically are dependent on finalization of other determinants at year-end, such as amortization, and will be reported in the 2022 financial statements. |
Consolidated Expense
Like revenue, expense is shown on Schedule A on a consolidated basis – operating, capital expenses and transfers are added together. Sixty-one percent or $16.3 million of the 2022 total consolidated expense is budgeted for operations. As of December 31, 2022, 81% of total operating expense ($13.2 million) has been spent or is payable.
Generally, operating expense is spread evenly throughout the year such that at the end of December there should be zero budget remaining for each of the service categories. Schedule A shows that most operational services have more than the expected level of budget remaining, which allows for timing differences, year-end accruals, and other project or contingency expenses.
The following table identifies some exceptions and related explanations relating to Schedule A.
| Expense Type | Actual | Budget | Variance | Explanation |
|---|---|---|---|---|
| Loss on Disposal of Assets | $5,474,228 | $0 | ($5,474,228) | Disposition of Chilco-Mill Hill land to CRD. This is a non-cash entry that reduces equity in tangible capital assets. |
| Transfers to Reserves | 2,132,926 | 606,300 | ($1,526,626) | Unanticipated transfers to reserves resulting from proceeds of Chilco-Mill Hill land disposition and Erskine Lane CACs. |
Non-core projects
The 2022 budget includes $716,340 designated for specific non-core projects. Non-core projects are defined as those that represent a change to service levels or are new non-recurring or infrequent items. The attached Schedule B – Non-core Projects details the non-core budget and the actual expenditures that total $336,536 to December 31, 2022 and includes projected completion dates. Many projects are in progress or not started and have not yet resulted in full payment for goods or services. Note that discrete actual costs for non-core projects relating to increases in personnel are not available but are included as a part of the total non-core budget.
Non-core projects that are not completed in 2022 will be brought forward to the 2023-2027 Financial Plan process for consideration. Further details about non-core projects can be viewed in the Budget Variance Dashboard and Financial Plan Insights app at viewroyal.ca.
Capital projects
The 2022 budget includes $3,888,140 allocated for specific capital projects. The attached Schedule C – Capital Projects details the capital budget and the actual expenditures that total $612,675 to December 31, 2022, and includes projected completion dates. Several projects are in progress or not started and have not yet resulted in full payment for goods or services.
Capital projects as listed in Schedule C are expected to be substantially completed within the identified budget and time frame other than the following items:
- As previously reported, staff are recommending the Island Hwy paving-Colwood interchange to Six Mile Rd project ($325,000 funded primarily from DCCs) not proceed in 2022 and that ongoing inspections be conducted to determine when the asphalt overlay should take place in the future.
- Traffic patrol pullout bay ($50,000 funded from Casino reserve). Staff anticipate this work will be completed and funded by BC Transit as part of their rapid bus transit route project. It is expected that the $50,000 allocated from the Casino reserve will not be required.
- The Council Chambers modification project ($50,000 funded from Casino reserve) is expected to exceed the original estimate due to the scope change of relocating the staff desk and additional audio/visual equipment required to accommodate the change. Staff estimate that Casino reserve funds reallocated from the traffic patrol pullout bay project will be sufficient to accommodate the revised total project costs.
Further details about capital projects can be viewed in the Budget Variance Dashboard and Financial Plan Insights app at viewroyal.ca.
SUSTAINABILITY/CLIMATE CHANGE IMPACTS:
This matter has no significant sustainability or climate change impacts.
FINANCIAL IMPLICATIONS:
Staff will continue to monitor financial results to ensure delivery of services and projects within the allocated budgets. Where applicable, staff will seek budget amendment approval in due course once the final funding requirements are known.
ALTERNATIVES:
N/A
CONCLUSION:
The Town’s financial results of operations and projects to date are within acceptable variances from budget, with highlights noted for Council’s information.
Due to timing differences between internal reporting timelines and invoices from vendors, there may exist variances between reported costs and final costs of some projects. As invoices are processed, a more complete calculation of actual variances will be made.
Cost overruns may be offset by deferring other projects with the same funding source, to the extent that there are no other significant impacts to levels of service. Should corrective measures be necessary, staff will inform Council of the effect, if any, on service levels or project completion timelines.
| CONCURRENCE: | Initials | Comments |
|---|---|---|
| Chief Administrative Officer | SJ for KA | Approval is recommended. |
| REVIEWED BY: | Initials |
|---|---|
| Director of Corporate Administration | Not requested |
| Director of Finance | DLC |
| Director of Development Services | Not requested |
| Director of Engineering and Parks | Not requested |
| Director of Protective Services | Not requested |
ATTACHMENTS:
Schedule A: 2022 Consolidated Budget Variance Schedule B: 2022 Non-core Projects Schedule C: 2022 Capital Projects
Document Images
(1)