Finance and Administration Report - Review of Reserve Funds and Surplus

TOWN OF VIEW ROYAL COMMITTEE OF THE WHOLE

TO: Committee of the Whole
DATE: June 9, 2016
FROM: M. Dillabaugh, Director of Finance
MEETING DATE: June 14, 2016

Review of Reserve Funds and Surplus

RECOMMENDATION

THAT Committee of the Whole recommend that Council establish the following three reserve funds: Reserve for Future Expenditures, Capital Renewal Reserve and Parks Improvement Reserve;

AND THAT Committee of the Whole recommend that Council approve the Reserve and Surplus Policy;

AND THAT Committee of the Whole recommend that Council approve Appendix A of the Reserve and Surplus Policy.

CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:

I concur with the recommendation.

PURPOSE OF REPORT:

To provide a covering report for the work conducted by Brenda Warner & Associates on behalf of the Town.

BACKGROUND:

One of the Town's 2015-2018 Strategic Priorities is Financial Sustainability and Service Excellence. As part of this strategic priority Council identified the need for the completion of a comprehensive asset plan. Part of the process of developing that plan includes the development of a Surplus Policy and a Reserve Funds review. Brenda Warner & Associates was contracted to conduct a review of the Town's Reserves and Surplus, develop a Surplus and Reserve Fund Policy and recommend minimum and optimal balances.

At the May 10, 2016 Committee of the Whole meeting Ms. Warner presented her findings and recommendations to the Committee. After discussion the Committee received the report.

The information is being brought forward with additional information and samples of funding requirements and funding strategies for some of the proposed reserve accounts.

Additional information for the RCMP Operating Reserve, Fire Department Machinery and Equipment Depreciation Reserve and the Machinery and Equipment Depreciation Reserve will be presented along with this report.

In addition, considering the Committee's discussion at the May 10th meeting, it is recommended that a policy be established that unappropriated surplus be transferred into reserves each year rather than remain in unappropriated surplus.

Wording to be added to Section 3 of the Reserve and Surplus Policy would be similar to:

Surplus Surplus represents non-renewable savings and should not be used for operating purposes or for on-going capital programs.

The Financial Stability Reserves (Operating Fund – General and Sewer) were established to ensure ongoing financial stability and fiscal health of the Town. They are funded from the year-end surplus in each respective fund.

Surplus will only be considered as a funding source for one-time expenditures. Any surplus not used for one-time expenditures will be transferred to infrastructure reserves, financial stability reserves and/or debt reduction reserves.

Conclusion:

The intent of this report and attached documentation is to provide guidance and recommendations based on a review of best practices and experience of other municipalities.

A Reserve and Surplus Policy will form an integral part of a comprehensive asset plan.

It is important to note that the policy can be refined in the future as the comprehensive asset plan is developed. Funding levels under the policy would be regularly reviewed and adjusted based on updated information.

Attached Documents:

1. Executive Summary – Brenda Warner & Associates
2. Draft Reserve & Surplus Policy
3. Draft Appendix A – Reserve & Surplus Policy
4. Target Reserve Fund Levels
5. Project Memorandum – Review of Reserve Funds and Surplus – Brenda Warner & Associates.

RECOMMENDATION

THAT Committee of the Whole recommend that Council establish the following three reserve funds: Reserve for Future Expenditures, Capital Renewal Reserve and Parks Improvement Reserve;

AND THAT Committee of the Whole recommend that Council approve the Reserve and Surplus Policy;

AND THAT Committee of the Whole recommend that Council approve Appendix A of the Reserve and Surplus Policy.

SUBMITTED BY: M. Dillabaugh, Director of Finance

REVIEWED BY: K. Anema, Chief Administrative Officer