BUDGET VARIANCE AND PROJECTS UPDATE REPORT – AUGUST 2021
Financial update reporting on revenues and expenses compared to the 2021 budget as of early September.
TOWN OF VIEW ROYAL
Finance & Administration Report
| TO: | Committee of the Whole | DATE: | September 9, 2021 |
| FROM: | S. Vella, Manager of Accounting | MEETING DATE: | September 14, 2021 |
BUDGET VARIANCE AND PROJECTS UPDATE REPORT – AUGUST 2021
RECOMMENDATION:
THAT the Committee receive the Budget Variance and Projects Update Report to September 3, 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 3, 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 August 2021.
DISCUSSION:
New Budget Variance Dashboard
At the July 13, 2021, Committee of the Whole (CoW) meeting, 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 was officially launched on September 7 and is now live on the Town of View Royal website. The dashboard displays year-to-date values (YTD) and is updated weekly. On Council’s suggestion, a 10-minute instructional video accompanies the dashboard and provides both a tour and explanatory information. Council also requested that usage be monitored, and these statistics are being tracked.
The financial values provided on the Budget Variance Dashboard are subject to change until finalized for the published financial statements. The values in the dashboard will not match those on the attached consolidated reports, as they reflect only operating revenue and expense and specific project financial information, rather than the complete consolidated budget.
Consolidated Budget Variance and Projects Update Report
Analysis shows that revenues and expenses to date are within expected variances to September 3, 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 is operating revenue. At the end of the August, $13.2 million (90%) in total operating revenue has been received or is receivable, putting View Royal on track to meet its targets. Some of this revenue may be deferred at year end, depending on the status of the related work. The following table identifies some exceptions and related explanations.
| Revenue Type | Actual | Budget | Variance | Explanation |
|---|---|---|---|---|
| User fees | $536,849 | $2,822,165 | 2,285,316 | Annual sewer user fees will be billed in October (est. $2,312,650) |
| Sales of services | 888,529 | 814,514 | (74,015) | Building and other permit revenue is $91,500 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. |
| Penalties and fines | 96,458 | 60,000 | (36,458) | The 10% late payment penalty on taxes was approximately double that of recent years, contributing $44,000 to this variance. |
| Other revenue | 987,431 | 232,275 | (755,156) | The variance is primarily a result of receiving net proceeds from the sale of land and the repatriation of sewer capital reserve funds from the CRD. Both items were not anticipated in the financial plan. |
| Gov’t grants and transfers | 1,444,904 | 2,095,677 | 650,773 | The variance includes a second gas tax revenue payment from the Federal government of $493,000 which was not anticipated in the budget. This surplus is offset by a shortfall of $1.1 million in conditional grants related to specific initiatives or projects. Projects relating to unsuccessful grant applications will not proceed until funding is secured. |
| DCCs, transfers, and internal cost allocations | 0 | 7,305,450 | 7,305,450 | 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 year-end. |
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 budget is operating expense. At the end of August 2021, 56% or $8.8 million has been spent or is payable.
Generally, operating expense is spread evenly throughout the year such that at the end of August, at least 33% of the budget should remain for each of the functional services. Schedule A shows that most operational services have greater than 33% budget remaining, which allows for the timing differences between month-end and pay cycles, year-end accruals, and other project or contingency expenses.
The variance amounts showing for transfers to reserves and reserve accounts, a combined $1.5 million, relates to proceeds from the disposal of land earlier in the year, the CRD sewer capital reserve repatriation and an additional Federal gas tax payment which were not anticipated in the budget. Remaining transfers to surplus, reserves and 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 $50,992 to September 3, 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 information and commentary are available on the Budget Variance Dashboard Non-core Projects Metrics report at www.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 $364,658 to September 3, 2021 and includes projected completion dates.
Further information and commentary are available on the Budget Variance Dashboard Capital Projects Metrics report at www.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 3, 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