Financial Policies Review - Finance and Administration Report
Report proposing amendments to Policy #1600-020 Reserves and Surplus to reflect changes including Community Amenity Contributions.
TOWN OF VIEW ROYAL
Finance and Administration Report
TO: Committee of the Whole DATE: November 2, 2020 FROM: D. Christenson, Dir. of Finance MEETING: November 10, 2020
Financial Policies Review
RECOMMENDATION:
THAT the Committee recommend Council adopt revised Policy #1600-020 Reserves and Surplus.
CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:
I concur with the recommendation. For KA
PURPOSE OF REPORT:
To consider proposed amendments to Policy #1600-020 Reserves and Surplus to reflect changes identified as a result of a financial policies review.
TIME CRITICAL:
A review of financial policies is one of the foundational steps in the financial planning process, as these policies influence and guide subsequent choices made throughout the budget development process.
BACKGROUND DISCUSSION:
Financial policies ensure proper fiscal accountability and stewardship over the Town’s funds. They ensure the financial plan is consistent with Council’s goals and objectives. To the extent that policies, principles and practices are documented, they foster a common understanding of the process while increasing transparency.
Over time, Council has considered and approved several financial policies that guide the development of the financial plan, subsequent decisions, and annual financial outcomes. Where there are no stated policies, staff rely on past practice or Council direction.
The following table describes the sources and purpose of key financial policies and the date they were last updated. Where available, each approved policy document is hyperlinked to its location on the Town’s website for reference.
| Key Topic | Policy or Source | Description | Purpose | Last Update |
|---|---|---|---|---|
| Financial Assistance | 1600-012 | Grants in Aid | To provide financial assistance to non-for-profit or community organizations that provide a public benefit | 2012 |
| 1600-018 | Permissive Tax Exemptions | 2012 | ||
| Expenditures | 1600-019 | Tangible Capital Assets | To identify specifics for the accounting of capital assets, including definitions, thresholds, and amortization parameters | 2012 |
| n/a | Asset Management Planning | To identify parameters for the development, maintenance and implementation of asset management plans, such as methodologies, strategies, and acceptable levels of service and risk | n/a | |
| Practice | Budget Variance Reporting | To specify guidelines for periodic financial reporting, such as frequency, report organization, level of detail, and comparative information | n/a | |
| n/a | Debt | To specify acceptable maximums or targets for total debt burden and debt service costs | n/a | |
| Revenues | 1600-020 | Reserves and Surplus | To guide the development, maintenance and use of financial reserve funds | 2017 |
| Practice | Revenue | To guide the management of revenue, including diversification targets, basis for fees and charges, and use of one-time or unpredictable revenues | n/a | |
| Council Direction | Taxation | To identify long-term property taxation strategies, including targets for assessment class multiples | annual | |
| Process | Practice | Financial Planning Process | To guide the development, maintenance and implementation of financial plans, including basis of budgeting, definitions of core and non-core items, and opportunities for public consultation | n/a |
DISCUSSION:
In July 2019, Council approved Policy 6400-041 Community Amenity Contributions (CAC policy) to provide guidance and establish targets for contributions associated with rezoning applications for changes to residential land use and/or density. The policy allows for cash amenities to be governed by a written agreement between the development proponent and the Town “to specify the purpose and permitted use(s) of the money, including consideration of alternatives should a Tangible Amenity project not proceed by a certain future date.”
Depending on the terms of an agreement under the CAC policy, the future treatment of the funds differs. Consider the following two scenarios:
Scenario 1: The agreement under the CAC policy identifies a specific purpose or time frame for the use of the funds. The specified purpose may be broad, such as general park amenities, or specific, such as a playground structure in a specified location.
Scenario 2: The agreement under the CAC policy does not identify a specific project or project area for the use of the funds, but instead, directs the funds to be contributed to one or more existing reserves, such as the Park Improvement or Capital Works reserve.
Funds received by the Town that are limited in use to a specified purpose, such as described in Scenario 1 are considered externally restricted, and as such, are recognized as revenue when the resources are used for the purpose specified. Until that time, the funds will be held in a deferred revenue account with the amount and changes in the balance disclosed in the annual financial statements, similar to the treatment of Development Cost Charges.
Funds received by the Town that are contributed to existing reserves, such as described in Scenario 2 would not be considered externally restricted. Because these reserves are governed by bylaws, which are at the discretion of Council, they would not impose an external restriction on the contribution.
Policy 1600-020 Reserves and Surplus provides guidance on the development, maintenance and use of financial reserve funds. The revised policy (Attachment A) includes the addition of a reserve account for Community Amenity Contributions and adds that reserve to the policy’s Appendix. This revision is necessary to establish the type of reserve account required by Community Amenity Contributions that are externally restricted, such as those described by Scenario 1. The following summarizes the proposed changes to Policy 1600-020:
- Definitions: “Reserve Accounts” modified to include deferred revenue.
- Reserve Accounts (Deferred Revenue): New section to address Community Amenity Contributions.
- Appendix A Reserve Accounts: New section to address Community Amenity Contributions.
- Unappropriated Surpluses: revised for formatting consistency with other sections and to clarify the source of funding and use.
- Overall: Revisions to improve consistency in formatting, section numbering, headings, and subheadings.
BUDGET IMPLICATIONS:
Staff refer to financial policies, Council direction and past policies when making choices in developing the five-year financial plan. Written policies provide clarity and are more transparent to the public. Council should identity which, if any, policies or practices they wish to further review.
RECOMMENDATION:
THAT the Committee recommend Council adopt revised Policy #1600-020 Reserves and Surplus.
SUBMITTED BY: D. Christenson, Director of Finance
REVIEWED BY: K. Anema, Chief Administrative Officer
Attachment A: Draft REVISED 1600-020 Reserves and Surplus Policy
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