Budget Variance and Projects Update Report to June 30, 2022

TOWN OF VIEW ROYAL Finance & Administration Report

TO: Committee of the Whole
DATE: July 7, 2022
FROM: S. Vella, Manager of Accounting
MEETING DATE: July 12, 2022

BUDGET VARIANCE AND PROJECTS UPDATE REPORT TO JUNE 30, 2022

RECOMMENDATION:

THAT the report dated July 7, 2022 from the Manager of Accounting titled “Budget Variance and Projects Update Report to June 30, 2022” be received for information.

CHIEF ADMINISTRATIVE OFFICER’S 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 June 30, 2022.

BACKGROUND:

On May 3, 2022, Council adopted Financial Plan Bylaw 1096. This report reflects budget values for revenue, expense and projects as presented in the Town’s 2022-2026 Financial Plan. The Budget Variance and Financial Plan Insights Dashboards provide 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 April this year with prior year actual values for comparison.

DISCUSSION:

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 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 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, 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 $17.2 million of the total 2022 budgeted revenue and transfers comes from operating activities. At June 30, 2022 over $12.4 million (72.1%) in total operating revenue has been received or is receivable. This percentage is typical to the end of the second quarter as the annual property tax levy completed in May is recorded all at once, rather than being spread evenly throughout the year. Second quarter casino revenue has not yet been received and will be reported to Council in the next Budget Variance and Projects Update. Other revenue categories reflect expected values for this time of year.

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 June 30, 2022, 42.7% of total operating expense (nearly $7 million) has been spent or is payable.

Generally, operating expense is spread evenly throughout the year such that at the end of the second quarter about 50% budget should remain 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. For example, the Town is billed quarterly for its RCMP contract, so costs for the second quarter have not yet been recorded. Interest and principal payments on debt reflect advanced payments for these services, so these categories reflect less budget values remaining than would otherwise be expected.

Non-core projects

The 2022 recommended 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 $171,948 to June 30, 2022 and includes projected completion dates. Many projects are just getting underway or are still in the planning stages and have not yet resulted in 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 as listed in Schedule B are expected to be substantially completed within the identified budget and time frame. 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 recommended 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 $214,598 to June 30, 2022 and includes projected completion dates. Several projects are just getting underway or are still in the planning stages and have not yet resulted in 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 with the following exception:

• Island Hwy paving-Colwood interchange to Six Mile Rd (C-118) is budgeted in 2022 at $325,000 funded primarily from DCCs. This project was meant to take advantage of the BC Transit priority lane improvements in the Island Highway corridor by piggybacking the paving of this section of Island Highway as a part of the larger project. Staff have learned that the financing structure of the BC Transit project negates the use of DCCs for this project. Additionally, a closer inspection of pavement condition indicates that the regular maintenance program, funding by the operational budget, will suffice to remediate portions of the pavement surface in the short term. Furthermore, a long-term restoration plan is in place for this road based on the recommendations of the Town's pavement conditions report. Based on that report an asphalt overlay for this portion of the road is recommended as early as 2024. As a result, staff are recommending this project not proceed in 2022 and that ongoing inspection be conducted to determine when the asphalt overlay should take place in the future.

Further details about capital projects can be viewed in the Budget Variance Dashboard and Financial Plan Insights app 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 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.

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 report dated July 7, 2022, from the Manager of Accounting titled “Budget Variance and Projects Update Report to June 30, 2022” be received for information.

SUBMITTED BY:
S. Vella, Manager of Accounting