Finance & Administration Report: BUDGET VARIANCE AND PROJECTS UPDATE REPORT TO SEPTEMBER 30, 2021
Quarterly financial update report comparing actual results to the 2021 budget as of September 30.
TOWN OF VIEW ROYAL
Finance & Administration Report
TO: Committee of the Whole
DATE: October 7, 2021
FROM: S. Vella, Manager of Accounting
MEETING DATE: October 12, 2021
BUDGET VARIANCE AND PROJECTS UPDATE REPORT TO SEPTEMBER 30, 2021
RECOMMENDATION:
THAT the Committee receive the Budget Variance and Projects Update Report to September 30, 2021, for information.
CHIEF ADMINISTRATIVE OFFICER COMMENTS:
I concur with the recommendation.
PURPOSE OF REPORT:
To provide Council with information regarding the financial results of operations and progress of projects to September 30, 2021.
BACKGROUND:
In May 2021 Council adopted a five-year financial plan (Bylaw 1071) that identifies revenue and expense targets and authorizes projects to further its strategic objectives. The attached schedules are provided to inform Council of the financial results of delivering services and projects to the end of the third quarter this year.
DISCUSSION:
New Budget Variance Dashboard
At the July 13, 2021 Committee of the Whole (CoW) staff presented the new Budget Variance Dashboard to Council with the goal of keeping both Council and the public informed of the financial results of operations. The dashboard also includes information about the status of both non-core and capital projects along with related operating budget and spending to date. The Budget Variance dashboard is now Live, available to Council and the public on the Town of View Royal website. The dashboard displays year-to-date values (YTD) and is updated weekly. Viewers may wish to watch the accompanying instructional video that gives a tour of the dashboard and provides helpful tips and explanations. Council also requested that statistics relating to dashboard use be monitored, and these analytics are being tracked.
Please note that the financial values provided are subject to change until finalized for the published financial statements. Also, the values in the dashboard will not match those on the attached consolidated reports, as the dashboard reflects only operating revenue and expense and specific project financial information, rather than the full consolidated budget.
Consolidated Budget Variance and Projects Update Report
Revenues and expenses to date are within expected variances to September 30, 2021 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 and capital revenue are added together in the same format as shown in the five-year financial plan bylaw. Sixty-four percent or $14.7 million of the total 2021 consolidated revenue budget comes from current year operations. At the end of the third quarter, $13.4 million (91%) in total operating revenue has been received or is receivable, putting View Royal on track to meet its targets. The following table identifies some exceptions and related explanations.
| Revenue Type | Actual | Budget | Variance | Explanation |
|---|---|---|---|---|
| User fees | $537,793 | $2,822,165 | 2,284,372 | Annual sewer user fees will be billed in October (est. $2,281,000) |
| Sales of services | 1,059,400 | 814,514 | (244,886) | Building and other permit revenue is $133,000 higher than expected for the full year, however, if projects are not completed by year end, some of this revenue may be deferred to 2022. Additionally, this variance includes $120,000 unplanned revenue from fighting wildfires, which is offset by associated expense; any surplus will be contributed to the fire vehicle and equipment replacement reserve. |
| Penalties and fines | 95,601 | 60,000 | (35,601) | In Q3, the 10% late payment penalty on taxes was approximately double that of recent years, contributing $44,000 to this variance. |
| Other revenue | 1,000,772 | 232,275 | (768,497) | The operating component of other revenue is close to the target at 67% received or receivable. The balance of the revenue to date is comprised of net proceeds from the sale of land, which was not anticipated in the budget and the repatriation to the sewer capital reserve due to an adjustment to the 2021 CRD sewer capital requisition. This adjustment was caused by a cumulative overage in prior-years’ requisitions relating to the new wastewater treatment plant. |
| Gov’t grants and transfers | 1,465,144 | 2,095,677 | 630,533 | The variance includes a second gas tax revenue payment from the Federal government of $500,000 which was not anticipated in the budget and $1.1 million in conditional grants related to specific initiatives or projects which will not proceed if the grants are not approved. |
| DCCs, transfers, and internal cost allocations | 168,029 | 7,305,450 | 7,137,421 | These items relate to entries that typically are dependent on finalization of other determinants at year-end, such as amortization, and will not be reported until after Q4. |
Consolidated Expense
Similar to revenue, expense is shown on Schedule A on a consolidated basis – operating, capital expenses and transfers are added together. Sixty-eight percent or $15.6 million of the 2021 total consolidated expense is budgeted for operations. At the end of the third quarter, 67% of total operating expense ($10.4 million) has been spent or is payable.
Generally, operating expense is spread evenly throughout the year such that at the end of the third quarter, at least 25% of the budget should remain for each of the functional services. Schedule A shows that most operational services have greater than 25% budget remaining, which allows for the timing differences, year-end accruals, and other project or contingency expenses.
The variance amounts showing as transfers to reserves and reserve accounts, a combined $1.47 million, includes proceeds from the disposal of land earlier in the year, the CRD capital reserve repatriation and an additional federal gas tax payment which were not anticipated in the budget. Remaining transfers to surplus, reserves and for internal cost allocations and amortization will be completed as a part of year-end work.
Non-core projects
The 2021 budget includes $455,540 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 $72,630 to September 30, 2021 and includes projected completion dates. 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.
Further details about non-core projects can be viewed in the Budget Variance Dashboard at viewroyal.ca.
Capital projects
The 2021 budget includes $2,609,526 allocated for specific capital projects. The attached Schedule C – Capital Projects details the capital budget and the actual expenditures that total $414,242 to September 30, 2021 and includes projected completion dates.
Further details about capital projects can be viewed in the Budget Variance Dashboard at viewroyal.ca.
Summary
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 can 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.
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.
Should corrective measures be necessary, staff will inform Council of the effect, if any, on service levels or project completion timelines.
RECOMMENDATION:
THAT the Committee receive the Budget Variance and Projects Update Report to September 30, 2021 for information.
SUBMITTED BY:
S. Vella, Manager of Accounting
REVIEWED BY:
D. Christenson, Director of Finance
Attachments:
- Schedule A: Consolidated Budget Variance
- Schedule B: Non-core Projects
- Schedule C: Capital Projects