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HomeMy Public PortalAboutFinancial Plan Process Policy COUNCIL POLICY Effective Date February 24, 2020 Page 1 of 7 SECTION: Finance TITLE: Financial Plan Process Policy PURPOSE: To define the overall approach and philosophy for budgeting and planning the five- year financial plan process to ensure clarity and consistency. To help decision makers make informed choices about the provision of services and capital assets and to promote stakeholder participation in the process. SCOPE: The baseline budget is defined as the steady state operating position of each budget authority. This reflects the resources required to provide the same level of service in the current year, before any new priorities or funding requests. New priorities pertain to any material change in service level from the prior year and must be accompanied by business plan documentation to substantiate the change. This policy defines budget process requirements for the Town of Oliver’s Operating Budgets, Capital Budgets, and Carry-Forward Budgets POLICY STATEMENT: Each budget or cost centre is committed to providing services and support to the operations of the Town . The services will be provided at a level commensurate with the level of resources that Council is willing to dedicate to that service. In keeping with the Town’s strategic plan, the adequacy of available Town resources, including taxation, shall be reviewed with respect to delivery of enhanced levels of core services. Financial Plan Process Policy Page 2 of 7 POLICY: Definitions: Budget Authority - refers to the person responsible for the Budget Centre. Budget Centre - is a detailed business planning unit under a single person of responsibility or authority, sometimes bridging multiple cost centres, with a specific focus. (Example: water distribution, sewer collection) Cost Centre - is defined by finance as a business unit, including revenues and expenditures for specific departments such as Water Utility, Sewer Utility Management and Operations etc. A cost centre can have inputs from more than one budget center. Level of Service - shall refer to the level of operating services provided in the preceding year of the budget year. Base Budget – refer to expenditures identified as core to the provisions of services to the Town of Oliver. Salaries & benefits, utilities, fuel, insurance, service contracts and fleet maintenance are considered as base expenditures. Non-discretionary items or expenditures - those expenditures that are tied to operationally essential services, maintenance, asset management, ratified contracts, repairs etc. that cannot be deferred or reduced. Standard funding sources - includes "expected" sources of revenue that recur from year to year without discretion on the part of the Town with respect to the source's existence. Such sources may include but not be restricted to general municipal taxes, utility fees and charges, and recurring grant sources from senior levels of government. Legislation The statutory requirements for local governments for the completion of financial plans (budgets) and the public processes are set out in the Community Charter in Section 165 and Section 166 respectively. Principles Each budget authority's proposed business plan and budget must reflect the Town’s strategic plan's priorities and be consistent with the priorities of Council and CAO. The financial plan must incorporate a long - term perspective, establish links to the Town’s organizational goals and focus decisions on results and outcomes. Financial Plan Process Policy Page 3 of 7 Five year operating plans will incorporate cost and staffing considerations for desired levels of both discretionary and non-discretionary services, changes in levels of service, as well as changes in service requirements coupled with capital projects. Cycle The financial plan will be prepared firstly for the utility capital and operating budgets and must be for five years and all the years should reflect known dynamic costs and priorities. The time frame of preparation for the utility budgets are presented in Appendix A. The financial plan for the general operating and general capital budgets will be prepared for five years and all the years should reflect known dynamic costs and priorities. The time frame of preparation for the general operating and capital budgets are presented in Appendix A. Expenditures listed below will be considered as base budget items and will not be reviewed by Council on an annual basis. 1. Wages & benefits – existing staff 2. Insurance – Property, liability, vehicle 3. Utility budgets – power, water, sewer, natural gas 4. Gasoline & diesel – based upon current market prices 5. Fleet Maintenance – gas, labor, repairs 6. Contracts for Services – solid waste, tourism, employment, RDOS mapping Budgetary items listed as Non Base Budget items will be reviewed and will not include any adjustments for inflation. New priorities pertain to any material change in service level from the prior year and must be accompanied by business plan documentation to substantiate the change. These actual expenditures will not include expenditures funded by sources not included in the definition of "standard funding sources" as established by the Chief Financial Officer from time to time. This policy is to be reviewed in 2023 and every four years post the municipal election. Any changes to this policy must be approved by March 31st. Financial Plan Process Policy Page 4 of 7 Overview The Chief Financial Officer or their designate will prepare the Five Year Financial Plan, presented by cost center reconciled to the budget centre and present to Council. Presentation The presentation of the annual budget by budget centre will be done by the CFO and the staff person responsible for a budget centre. Presentations will reflect how they support the strategic plan. All assumptions used in the budgets and budget presentations will be identified in the presentations. The five year financial plan presented by the CFO will be summarized by budget centre and revenue source and be aggregated to reflect the Town’s taxation requirement. Staff will review with the Oliver Rural Fire District the Oliver fire departments budget in accordance with the fire protection agreement after the Town has approved the budget. Staff will solicit input from the Airport Committee for the operating and capital financial plans for the Airport. The requests of the airport committee will be at the discretion of Council. Exceptional Operating Expenses It is acknowledged that certain operating expenditures fluctuate significantly on a year to year basis. Each budget authority will provide for such irregular expenditure patterns by arranging for a special reserve(s) to be created and funded on a year to year basis as part of their operating budget. The creation of any such reserve will be at the discretion of the Finance department. Carry Forwards Carry forwards may be done for specific operating budget projects and Capital budget items. All carry forwards at year end must be submitted to Finance in accordance with the timelines presented in Appendix A. The carry forward list must include the estimated dollar amount, the year of origin, the carry forward account number, the month and year of completion and the budget authority. Each carry forward must Financial Plan Process Policy Page 5 of 7 also have a brief explanation of why the project was not completed and a brief explanation of how the project will be completed by the month and year of completion provided by the budget authority. All carry forwards submitted without explanations and month and year of completion will flow back to the capital surplus. For greater certainty all preliminary carry forward budgets must be completed in advance of the finalized capital budgets and be included in the associated 5 year capital plans/budgets. This will ensure that both carry forward and newly budgeted capital projects in the year will be completed in the year. The final carry forward budgets shall be calculated by Finance as part of the year-end process. Budget Amendments All budget amendments must be submitted to the CFO on the budget amendment form signed by the appropriate signing authorities. All budget amendments submitted to Council for a resolution must identify the funding source or provide options for Council to choose the funding source. (CC Section 173 (4) (b)). The five-year financial plan bylaw will be updated if required in September with all amendments processed to date. Budget amendments that require a council resolution: • strategic project budget change • An additional ask on surplus • Significant change on the intent of the spend • Political sensitivity • Not in compliance with policy or bylaw • New project from any source Taxation Impact The financial plan will present the estimated tax requirement for all five years. Fees and Charges Fees and charges form a material part of budgeted revenues. For greater certainty the annual review of the Fees and Charges Bylaw must be completed by August 31, prior to the commencement of the budget process. Variance reporting Financial Plan Process Policy Page 6 of 7 Variances to budget shall be reported out quarterly by departments with explanations included for all positive and negative variances in excess of $10,000 or 20% of budget. If a budgetary is less than $1,000 it is not required to be reported. Financial Plan Process Policy Page 7 of 7 Appendix A Budget Timeline Month Description Sept/October Management to prepare departmental budgets November Management to prepare water/sewer budgets November Council deliberation of water, sewer operating & capital budgets November 3 readings of water & sewer rate bylaws December Adopt water & sewer rate bylaws Dec/January Preparation of general capital & operating budgets January - 2nd Friday Carry forward capital requests deadline January - last week Council deliberation of general capital & operating budgets February 3 readings of 5 year financial plan February Adopt 5 year financial plan April 3 readings of tax rate bylaw April Adopt tax rate bylaw