finance 101 city of west kelowna thompson-nicola regional district

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FINANCE 101City of West Kelowna

Thompson-Nicola Regional District

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City of West Kelowna

IntroductionsJim Zaffino, City of West KelownaDoug Rae, Thompson-Nicola Regional DistrictBrian Callander, BDOBrent Ashby, KPMG

Thompson-Nicola Regional DistrictFront Page1


AgendaCommunity CharterLocal Government ActRisk AreasBorrowingAnnual ReportsAudit in More DetailFinancial Reporting Terminology


COMMUNITYCHARTERCity of West Kelowna



Community CharterFinancial PlanAuditRevenue, Expenditure, Liabilities and InvestmentsReserve FundsRestrictions on Use of Municipal Funds


Community CharterFinancial Plan

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LEGISLATIVE REQUIREMENTSMunicipalities:Community CharterPart 6 Financial ManagementSection 165 Financial PlanRegional Districts:Local Government ActPart 24 Regional DistrictsDivision 5 Financial OperationsSection 815 Financial PlanDivision 1 Financial Planning and AccountabilityCommunity CharterFinancial PlanInternal Page 26

Requirements:

A financial plan must be adopted annually, by bylawRegional Districtsno later than March 31Municipalitiesbefore the annual property tax bylaw is adopted (before May 15)may be amended by bylaw at any time.planning period for a financial plan is 5 years, however, West Kelowna has a 10 year budget- year in which the plan is specified to come into force + 9 years that followCommunity CharterFinancial PlanInternal Page 27

Content:

must set out the following for each year:(a) the proposed expenditures for the service;(b) the proposed funding sources for the service;(c) the proposed transfers between funds in respect of the service.RD - shown separately for each serviceCommunity CharterFinancial PlanInternal Page 28

Content (contd):

must not plan for a "deficit in any year - total expenditures + transfers to other funds must not exceed funding sources + transfers from other funds RD in respect of each service

In the event that actual expenditures and transfers to reserves exceed actual revenues and transfers from other funds in any one year, the resulting deficiency must be included as an expenditure in the financial plan for the next year.

Community CharterFinancial PlanInternal Page 29

Content details (contd):Proposed Transfers Between FundsThe proposed transfers between funds must set out separate amounts for: the amount to be transferred to and from each reserve fund; andThe aggregate amount to be transferred to and from accumulated surplus.


Content details (contd):Municipalities only

Municipalities are further required to include more explicit revenue and tax policy disclosure.

The financial plan must set out the municipalitys objectives and policies in relation to each of the following, for each year of the planning period: For each of the funding sources, the proportion of total revenue that is proposed to come from that source;The distribution of property tax values among the property classes subject to tax; andThe use of permissive tax exemptions.


Lawful Expenditure AuthorityThe financial plan provides the expenditure authority for the local government. Expenditures may not be incurred unless they are provided for in the financial plan for the current year.EmergenciesThe only exception to the above rule is when expenditures are required to deal with an "emergency" situation. In this case, expenditures should be made as demanded by the situation. The financial plan must then be amended as soon as possible afterwards to reflect the expenditures and funding sources for the expenditures.Community CharterFinancial PlanInternal Page 212

Public ConsultationPrior to the adoption of the proposed financial plan or amendment of the financial plan, the local government must undertake a process of public consultation.

The legislation does not specify the format of the public consultation process it is left to the local governments discretion as to what is most effective for them.


City of West Kelowna Budget ProcessInput obtained from:

General Public through yearly in house Citizen SurveyCouncils Strategic PrioritiesNeighbourhood AssociationsE-Division RCMPB.C. TransitMuseum BoardAll City Division and Departments


City of West Kelowna Budget ProcessAn amended Ten-Year Financial Plan is introduced in Dec of each year and Council starts deliberating in January. The plan incorporates all known operating revenues and expenditure increases, updates the capital for the next fiscal yearThe plan assumes the same service level as the current yearBusiness cases for Councils consideration must be presented to support the following budget changes:All FTE requestsNon-wage operating cost increases in excess of the permitted inflationary increases.It includes an estimate for new taxes from growth based on preliminary new construction numbers from BC Assessment Authority.

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City of West Kelowna Budget ProcessThe amended plan is adopted in April approving the required expenditure authority changes required to carry on the City operations. Council and public consultation continue into the next fiscal year, at which time year-end results are known and final assessment numbers are available from BC Assessment.Any additional requests for new or increased services or capital expenditures that were not included in the Dec Budget will be discussed during this consultation process.Updates, incorporating all changes required to the Financial Plan will be adopted by Bylaw, prior to adopting the Annual Property Tax Bylaw for the current year. (no later than May 14).

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CITY OF WEST KELOWNA BUDGET CONTROLS:

If a Division Budget is greater then the Price Index (wages and material), an Increase in service level form must be filled out.Any request for new staff must be accompanied with a FTE business plan.All Capital projects which are requested for the current year must be accompanied with a detailed plan.

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City of West Kelowna budget controls cont.:The budget presented to Council is the base line budget from the previous year.The Service and FTE increases are only added to the budget after Council approves them. Council does receive a report which outlines the tax consequences of each request. Capital is added to the budget once Council has reviewed and approved the current years requests. Internal Page 218

Regional Districts Budget ProcessPrepare a provisional 5-year financial plan in the fall, which is formally adopted by the BoardSolid waste management service is based on 10-year planIncorporates all known plans for the next fiscal year and following four, including changes in service levels, new services, Board Strategic PlanIs based on the same property assessment values as the immediately preceding year, so highlights pure dollar impacts of year-to-year changesYear-end surpluses estimated wont be known with certainty until the new yearSame goes for capital projects carrying over into next year

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Regional Districts Budget ProcessOnce approved, provisional budget is put out to the public for more formalized input and consultationA final budget is prepared and adopted before legislative requirements in March each yearUpdates provisional budget with new property assessment changes (available January), actual surplus for each service and any other new information that has become known Incorporates decisions made with the input from public consultationInternal Page 220

SOME TAKE-AWAYS:

The process has an annual time table, but really is going on constantly throughout the yearIts important to have well defined service levels, expectations for such, as this significantly impacts spendingNeed to think long-term in order to smooth taxation and build appropriate reserves for future needsInternal Page 221


Community CharterAuditExternal auditsInternal (performance) auditsThompson-Nicola Regional District

Front Page22External Audit

Examination of the accounting records and financial statements Objective is to determine whether the external financial statements present fairly, in all material respectsProvide observations of control deficiencies as they relate to financial reportingConducted by independent third party auditorsCity of West Kelowna

Community CharterAudit

Thompson-Nicola Regional DistrictCommunity CharterAuditInternal/Performance Audit

Examination of a program, function or systemObjective is to assess efficiency and effectivenessProvide suggestions and recommendations on efficiency and effectivenessCan be conducted by external consultants or internal auditors

Proposed Revenue SourcesThe financial plan must include separate amounts for each of the following : the amount required to pay interest and principal on debt;revenue from property value taxes;revenue from parcel taxes;revenue from fees and charges;proceeds from borrowing (all borrowing sources should be included, other than revenue anticipation borrowing under the Community Charter s. 177 or the Local Government Act s. 821); andrevenue from other sources (all proposed revenue that does not fall into one of the other prescribed categories).

Revenue, Expenditures, Liabilities and InvestmentsInternal Page 225

Revenue, Expenditures, Liabilities and InvestmentsProposed ExpendituresThe following must be set out separately in the financial plan: the amount required to pay interest and the amount required to pay principal on debt;the amount required for capital purposes;the amount required to cover a prior year deficiency; andamounts required for other purposes (all expenditures that do not fall into one of the prescribed categories).

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Revenue, Expenditures, Liabilities and Investments

Limit on borrowing and other liabilities

174 (1) A municipality may only incur a liability as expressly authorized under this or another Act.(2) A municipality may not incur a liability if incurring the liability would cause the municipality to exceed a limit established under subsection (3) unless this is approved under subsection (4).(3) For the purposes of subsection (2), the Lieutenant Governor in Council may make regulations(a) establishing a limit on the aggregate liabilities and the method for determining that limit, and(b) establishing a limit on the annual cost of servicing the aggregate liabilities and the method for determining that limit.(4) With the approval of the inspector, a municipality may exceed the limit established under subsection (3).(5) Except for borrowing under section 177[revenue anticipation borrowing], a municipality must not incur a liability for which expenditures are required during the planning period for its financial plan, unless those expenditures are included for the applicable year in the financial plan.

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Revenue, Expenditures, Liabilities and InvestmentsLiabilities under agreements175 (1) A council may, under an agreement, incur a liability if(a) the liability is not a debenture debt, and(b) the period of the liability is not longer than the reasonable life expectancy of the activity, work or service under the agreement.(2) Subject to subsections (4) and (5), if an agreement under subsection (1) is(a) for more than 5 years, or(b) for a period that could exceed 5 years by exercising rights of renewal or extension,the council may only incur the liability with the approval of the electors.(3) The matter put before the electors under subsection (2) must identify the other parties to the agreement and the nature, term and amount of the liability.(4) Approval of the electors is not required under subsection (2) for the following:(a) a liability to be incurred under an employment contract or collective agreement;(b) a liability to be incurred for the supply of materials, equipment or services under an agreement referred to in section 3 of the Police Act;(c) a liability to be incurred in circumstances prescribed by regulation or in relation to an agreement or class of agreement prescribed by regulation, subject to any conditions established by regulation.(5) If(a) the concept for a partnering agreement has received the approval of the electors, and(b) within 5 years after that approval, the municipality enters into a partnering agreement that is in accordance with that approved concept,approval under subsection (2) is not required for the partnering agreement.(6) For the purposes of subsection (5), the concept for the agreement to be put before the electors must identify the following:(a) the nature of the activity, work or facility to be provided under the partnering agreement;(b) the maximum term of the agreement;(c) the maximum liability that may be incurred by the municipality under the agreement;(d) any other information required by regulation.

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LG Finance 101

InvestingFront Page29

LEGISLATIVE REQUIREMENTSMunicipalities:Community CharterPart 6 Financial ManagementSections 183 187Regional Districts:Local Government ActPart 24 Regional DistrictsDivision 5 Financial OperationsSection 815 Financial PlanDivision 3 Expenditures, Liabilities and InvestmentsInternal Page 230

Investment of Municipal Funds

CC section 183:

Money held by a municipality that is not immediately required may only be invested or reinvested in one or more of the following:securities of the Municipal Finance Authority (MFA);pooled investment funds under section 16 of the Municipal Finance Authority Act;securities of Canada or of a province;securities guaranteed for principal and interest by Canada or by a province;securities of a municipality, regional district or greater board;Internal Page 231


investments guaranteed by a chartered bank;deposits in a savings institution, or non-equity or membership shares of a credit union;other investments specifically authorized under this or another Act.CC section 183:Internal Page 232


What these all have in common is...LOW RISK

Internal Page 233

City of West Kelowna Investment PolicyInvestment policy conforms to CC section 183Primary Investment Objectives are the preservation of capital and high liquiditySecondary objective will be to maximize its ROI, while adhering to specific limits, for e.g., restricting the investment % by institution.Investments will be restricted to high-quality money market and fixed income instruments. Low risk.Internal Page 234

City of West Kelowna Investment PortfolioMaintains investment portfolios for its short-term investments (current operating requirements), medium-term and long-term investments.Cash flows are projected based on revenues, operating and capital expenditures to determine duration of investment periodInternal Page 235

Property Accepted in Trust

All money that is held by a municipality and is subject to a trust must be invested in accordance with section 183 until it is required for the purposes of the trust.If, in the opinion of a council, the terms or trusts imposed by a donor, settlor, transferor or testator are no longer in the best interests of the municipality, the council may apply to the Supreme Court for an order under subsection (3).CC section 184:Internal Page 236

Ownership of Corporations

A municipality may onlyincorporate a corporation other than a society, oracquire shares in a corporationwith the approval of the inspector or as authorized by regulation.An incorporation or acquisition under subsection (1) applies as an exception to the restriction under section 183 [investment of municipal funds]CC section 185:Internal Page 237

Investment Opportunities

Locally Banks, GICs, etc.MFA GICs Index FundsInternal Page 238

Its important to match the investment vehicle chosen against the needs of the local governmentConsider

Short TermLonger Term-> cash management-> reserves / LT savingsInternal Page 239

Community CharterReserve FundsDivision 4Reserve FundsEstablishment of reserve funds188 (1) A council may, by bylaw, establish a reserve fund for a specified purpose and direct that money be placed to the credit of the reserve fund.(2) If a municipality receives money in respect of any one of the following, the council must establish a reserve fund for the applicable purpose:(a) money received from the imposition of a development cost charge, which must be placed to the credit of a reserve fund in accordance with section 935[use of development cost charges] of the Local Government Act;(b) money received(i) from the sale of park land,(ii) under section 27 (2) (b)[disposal of park land], or(ii) under section 941 (12)[provision of park land on subdivision] of the Local Government Act,which must be placed to the credit of a reserve fund for the purpose of acquiring park lands;(c) money received under section 41 (1) (d)[disposal of highway property that provides access to water], which must be placed to the credit of a reserve fund in accordance with that section;(d) money received under section 906 (2)[parking space requirements] of the Local Government Act, which must be placed to the credit of a reserve fund for the purpose of providing(i) off-street parking spaces, or(ii) transportation infrastructure that supports walking, bicycling, public transit or other alternative forms of transportation;(e) except for tax sale proceeds, money received from the sale of land and improvements, which must be placed to the credit of a reserve fund for the purposes of paying any debt remaining in relation to the property and of acquiring land, improvements and other assets of a capital nature.

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Community CharterReserve FundsUse of money in reserve funds189 (1) Subject to this section, money in a reserve fund, and interest earned on it, must be used only for the purpose for which the fund was established.(2) If the amount to the credit of a reserve fund is greater than required for the purpose for which the fund was established, the council may, by bylaw, transfer all or part of the amount to another reserve fund.(3) If the current municipal revenue is not sufficient for the amount required to pay compensation in respect of property expropriated or injured or to carry out works referred to in section 32 (3)[entry on land to mitigate damage], the council may, by bylaw, use money from a reserve fund to the extent required.(4) As a restriction on subsection (2), a transfer from a reserve fund established for a capital purpose may only be made to another reserve fund established for a capital purpose.(4.1) Despite any other enactment, if(a) money in a reserve fund established for a capital purpose, including a reserve fund under section 935 of the Local Government Act established for a capital purpose, is not currently required for that purpose, and(b) the municipality has another reserve fund established for a capital purpose,the municipality may use money in the first reserve fund for the purposes of the second reserve fund.(4.2) If money from one reserve fund is used under subsection (4.1) for the purposes of another reserve fund, the municipality must repay to the first reserve fund, no later than the time when the money is needed for the purposes of that reserve fund,(a) the amount used, and(b) an amount equivalent to the interest that would have been earned on the amount used had it remained in the first reserve fund.(5) As a restriction on subsections (2) and (3), a council may not transfer amounts or use money from a fund required under section 188 (2) (a)[development cost charge reserve fund] or (b) [park land acquisition reserve fund] unless the bylaw is approved by the minister.

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Community CharterRestrictions on Use of Funds[Division 5Restrictions on Use of Municipal FundsPurposes for which borrowed money may be used

190 (1) Subject to this section, money borrowed by a municipality under any Act must not be used for a purpose other than that specified in the bylaw or agreement authorizing the borrowing.(2) A council may, by bylaw adopted with the approval of the electors, use all or part of money borrowed for a specific purpose and not repayable in the current year for any other lawful purpose of the municipality.(3) If some of the money borrowed for a specified purpose remains unused after payment of the costs related to that purpose, a council may, by bylaw, provide for the use of the unused money for one or more of the following:(a) to retire debentures issued for the purpose;(b) to purchase and cancel debentures issued for the purpose;(c) for expenditures of a nature similar to the purpose in the bylaw authorizing the money to be borrowed;(d) for a reserve fund for matters in paragraph (a), (b) or (c).

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Community CharterRestrictions on Use of Funds191 (1) A council member who votes for a bylaw or resolution authorizing the expenditure, investment or other use of money contrary to this Act or the Local Government Act is personally liable to the municipality for the amount.(2) As an exception, subsection (1) does not apply if the council member relied on information provided by a municipal officer or employee and the officer or employee was guilty of dishonesty, gross negligence or malicious or willful misconduct in relation to the provision of the information.(3) In addition to any other penalty to which the person may be liable, a council member who is liable to the municipality under subsection (1) is disqualified from holding office(a) on a local government,(b) on the council of the City of Vancouver or on the Park Board established under section 485 of the Vancouver Charter, or(c) as a trustee under the Islands Trust Actuntil 4 years from the date of the vote to which the disqualification relates.(4) Money owed to a municipality under this section may be recovered for the municipality by(a) the municipality,(b) an elector or taxpayer of the municipality, or(c) a person who holds a security under a borrowing made by the municipality.Front Page43

LOCAL GOVERNMENTACTCity of West Kelowna

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Local Government Act[Purposes of this Act1 The purposes of this Act are(a) to provide a legal framework and foundation for the establishment and continuation of local governments to represent the interests and respond to the needs of their communities,(b) to provide local governments with the powers, duties and functions necessary for fulfilling their purposes, and(c) to provide local governments with the flexibility to respond to the different needs and changing circumstances of their communities.Purposes of regional districts2 Recognizing that regional districts are an independent, responsible and accountable order of government within their jurisdiction, the purposes of a regional district include(a) providing good government for its community,(b) providing the services and other things that the board considers are necessary or desirable for all or part of its community,(c) providing for stewardship of the public assets of its community, and(d) fostering the current and future economic, social and environmental well-being of its community.Principles for governmental relations3 The relationship between regional districts and the Provincial government in relation to this Act is based on the following principles:(a) cooperative relations between the Provincial government and regional districts are to be fostered in order to efficiently and effectively meet the needs of the citizens of British Columbia;(b) regional districts need the powers that allow them to draw on the resources required to fulfill their responsibilities;(c) notice and consultation is needed for Provincial government actions that directly affect regional district interests;(d) the Provincial government recognizes that different regional districts and their communities have different needs and circumstances and so may require different approaches;(e) the independence of regional districts is balanced by the responsibility of the Provincial government to consider the interests of the citizens of British Columbia generally.Broad interpretation4 (1) The powers conferred on regional districts and their boards under this Act must be interpreted broadly in accordance with the purposes of this Act and in accordance with regional district purposes.(2) If(a) an enactment confers a specific power on a regional district or board in relation to a matter, and(b) the specific power can be read as coming within a general power conferred under this Act,the general power must not be interpreted as being limited by that specific power, but that aspect of the general power that encompasses the specific power may only be exercised subject to any conditions and restrictions established in relation to the specific power.Definitions

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RISK AREASCity of West Kelowna

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Risk AreasReputational riskFinancial reporting riskInternal control risk

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Risk AreasReputational riskWhat is reputational risk?How do you identify it?How do you report it?How do you manage it?Front Page48

Risk AreasFinancial reporting riskFinancial reporting is the process of producing financial information to stakeholdersInherent risk that the financial information is wrongHow do you identify it? How do you manage it?

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Risk AreasInternal control riskDo you have the appropriate data to assess your organizations performance?Are you aware of the top internal control risks of your organization?How frequently does management report to you on the Citys internal controls?

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LG Finance 101

BorrowingFront Page51

LEGISLATIVE REQUIREMENTSMunicipalities:Community CharterPart 6 Financial ManagementSections 174 182Regional Districts:Local Government ActPart 24 Regional DistrictsDivision 5 Financial OperationsSections 818 826Division 3 Expenditures, Liabilities and InvestmentsLGA cross-references to some sections under the Community CharterInternal Page 252

Why Borrow?

Internal Page 253

Step 1:

Loan Authorization Bylaw draftedStep 2:

Submit bylaw to Ministry of Community, Sport and Cultural Services for review and approval by the Inspector

Three (3) readings of the bylaw by Council (RD Board)Submission of Liability Servicing Limit Certificate(municipalities only not required of RD)Internal Page 254

Step 3:

Elector approval of the Bylaw (if required)1) Referendum (assent of the electors);

2) Petition(approval of the electors); or 3) Alternate Approval process (approval of the electors)

Local governments can use the Alternative Approval Process under Part 4, Division 2 of the Community Charter as a method to gauge public opinion in regard to certain types of proposed bylaws, agreements, or other matters. It is most commonly used in relation to long-term borrowing bylaws. It is a less expensive option than using a referendum to gauge public opinion. It can be used whenever the legislation requires a local government to obtain the approval of the electors.

What is RequiredA local government must publish a notice in a newspaper outlining the purposes of a proposed bylaw, agreement, or other matter where the approval of the electors is required. After the second of two notices is advertised, electors have 30 days in which to advise their local government that in their opinion, the matter is of such significance that a referendum should be held. If more than 10% of the electors hold this opinion, then the local government cannot proceed with the proposed bylaw, agreement, or other matter without holding a referendum.

PetitionLGA Section 823.11Must get at least 50% of the parcel owners to sign, and those signatures must represent 50% of the net taxable value of the land and improvements within the participating electoral area 55

Step 4:

Reconsideration and adoption of the bylaw by Council / Board... followed by minimum One Month quashing periodStep 5:

Apply to Ministry for Certificate of ApprovalStep 6:

Municipal Security Issuing Resolution and Agreement Council passes a resolution and forwards it on to the Regional District Board and the MFAInternal Page 256

Step 7:

Regional District Security Issuing BylawThree (3) readings of the bylaw by RD Board... followed by minimum ten (10) day quashing periodStep 8:

Submit RD bylaw to Ministry of Community, Sport and Cultural Services for review and approval by the InspectorApply to Ministry for Certificate of ApprovalInternal Page 257

5 years from the date of adoption, if the local government has not done temporary borrowing or gone to long-term borrowing through a security issuing bylawBylaw expires

Amending the bylaw does not extend its lifeInternal Page 258

Internal Page 259

MFA Spring and Fall:

The MFA issues long-term debt twice per year in the spring and fallThe RD has deadlines for submissions to Ministry end of February and end of August (usually)Internal Page 260

MFA Spring and Fall:

The MFA returns 98.40% of the loan requested1% is withheld from the proceeds and kept in trust in the Debt Reserve Fund (DRF) as security (returned at end of term of debt)0.60% is withheld as a charge for processing the debt issue part of the cost of borrowingLoan of $1,000,000 equals proceeds of $984,000Internal Page 261

10 Year Term3.5% Capitalization S/F Factor:Principal: 1,000,000.00 Interest Rate:3.00%0.083290944Principal PymntInterest PymntTotal PymntActuarialReducing Balance1,000,000.00 Yr 1 Semi Annual15,000.00 15,000.00 1,000,000.00 Yr 1 Annual85,241.37 15,000.00 100,241.37 914,758.63 Yr 2 Semi Annual15,000.00 15,000.00 914,758.63 Yr 2 Annual85,241.37 15,000.00 100,241.37 2,983.45 826,533.82 Yr 3 Semi Annual15,000.00 15,000.00 826,533.82 Yr 3 Annual85,241.37 15,000.00 100,241.37 6,071.32 735,221.13 Yr 4 Semi Annual15,000.00 15,000.00 735,221.13 Yr 4 Annual85,241.37 15,000.00 100,241.37 9,267.26 640,712.50 Yr 5 Semi Annual15,000.00 15,000.00 640,712.50 Yr 5 Annual85,241.37 15,000.00 100,241.37 12,575.06 542,896.07 Yr 6 Semi Annual15,000.00 15,000.00 542,896.07 Yr 6 Annual85,241.37 15,000.00 100,241.37 15,998.64 441,656.07 Yr 7 Semi Annual15,000.00 15,000.00 441,656.07 Yr 7 Annual85,241.37 15,000.00 100,241.37 19,542.04 336,872.66 Yr 8 Semi Annual15,000.00 15,000.00 336,872.66 Yr 8 Annual85,241.37 15,000.00 100,241.37 23,209.46 228,421.84 Yr 9 Semi Annual15,000.00 15,000.00 228,421.84 Yr 9 Annual85,241.37 15,000.00 100,241.37 27,005.24 116,175.23 Yr 10 Semi Annual15,000.00 15,000.00 116,175.23 Yr 10 Annual85,241.37 15,000.00 100,241.37 30,933.87 0.00 TOTALS:852,413.68 300,000.00 1,152,413.68 147,586.32 Internal Page 262

MFA Temporary:

Can be used to fill in between spring and fall issues or for borrowings expected to last less than 5 yearsFunds can be accessed any time of year once appropriate approvals receivedShort term loans are direct obligations of the local government requesting the funding. In the case of a municipality, it does not have to seek consent of their regional district to participate in short term borrowing which is the case for long term borrowing.Internal Page 263

MFA Temporary:

There are no fees to set up a short term loanInterest is calculated daily, compounded monthly and automatically collected the 2nd business day of the following monthInternal Page 264

Revenue Anticipation Borrowing:

Under Section 177 of the Community Charter and section 821 of the LGA, the local government may, by bylaw, borrow funds that may be necessary to meet its current lawful expenditures in anticipation of receiving revenues later that year (cash flow management)Money borrowed in this fashion must be repaid when the anticipated revenue is received.Internal Page 265

Limitations on Borrowing:

Under the LGA, for each municipality the Lieutenant Governor in Council sets the following:limit on the aggregate liabilities;limit on the annual cost to service the aggregate liabilities; andThe methods of establishing each of the above limitsThese limits may only be exceeded with approval of the inspectorInternal Page 266

Limitations on Borrowing:Except for borrowing under CC section 177 [revenue anticipation borrowing], a municipality must not incur a liability for which expenditures are required during the planning period for its financial plan, unless those expenditures are included for the applicable year in the financial planSame goes for Regional Districts, but reference is to LGA section 821 [revenue anticipation borrowing].Internal Page 267

Liability Serving Limit Certificate:Municipalities annual debt servicing costs cannot exceed 25 % of its revenue. West Kelowna Council has set our maximum at 15%. Annual Debt Servicing is the interest and principle payments on the outstanding Debt.Municipalities are required to submit the certificate with their borrowing Bylaws to ensure the new debt to be acquired does not exceed the limit. Approval of the Inspector of Municipalities is required if the annual limit is exceeded Internal Page 268

SOME TAKE-AWAYS:

This is a very involved process that requires TIME for staff to complete properlyDont under-estimate the amount of borrowing required during approval stageDont borrow more than you need you cant return it earlyMatch term of borrowing to needs and/or benefits long or shortInternal Page 269

LG Finance 101Annual ReportsFront Page70

LEGISLATIVE REQUIREMENTSCommunity CharterDivision 5 ReportingSection 98 Annual Municipal Report

Internal Page 271

Annual Municipal Report

CC section 98:

Before June 30 in each year, a council mustprepare an annual report,make the report available for public inspection upon request, andPresent the report for public inspection at an annual public meeting of Council.Internal Page 272

Annual Municipal Report

CC section 98:

The annual report must include the following:audited annual financial statements for the previous year,for each tax exemption provided by a council, the amount of property taxes that would have been imposed on the property in the previous year if it were not exempt for that year;a report respecting municipal services and operations for the previous year;a progress report respecting the previous year in relation to the objectives and measures established for that year;Internal Page 273

Annual Municipal ReportCC section 98:any declarations of disqualification made under section 111 [application to court for declaration of disqualification] in the previous year, including identification of the council member or former council member involved and the nature of the disqualification;a statement of municipal objectives, and the measures that will be used to determine progress respecting those objectives, for the current and next year;any other information the council considers advisable, In West Kelownas case we include the yearly Citizen Survey. Internal Page 274

Annual Meeting

CC section 99:

The council must annually consider, at a council meeting or other public meeting,the annual report prepared under section 98, andsubmissions and questions from the public.The annual meeting must occur at least 14 days after the annual report is made available for public inspection under section 97.The council must give notice of the date, time and place of the annual meeting in accordance with section 94 [public notice].Note that if the last date available for the AGM is June 29th, and the report must be available for public inspection for at least 14 days previous to this, then the report must be made available no later than June 14th.75

Financial Information DisclosuresFinancial Information Act of BC:Schedule of DebtsSchedule of Remuneration: Elected Officials, which includes both remunerations and expensesSchedule of Remuneration: Employees, also includes both remunerations and expenses individually for any >$75,000 and collectively for the remainderSchedule of Goods and Services suppliers paid >$25,000 individually and the rest collectivelySchedule of Guarantee and Indemnity AgreementsInternal Page 276

Financial Information DisclosuresFinancial Information Act of BC:Statement of Severance AgreementsSchedule of Remuneration: Committee MembersInternal Page 277

AUDIT INMORE DETAILFront Page78

Audit in More DetailRoles and responsibilitiesManagements responsibilityAuditors report

Front Page79Municipal StaffPrepares financial statementsResponsible for critical accounting policies, judgments and estimatesResponsible for internal control processes

Council provides oversight offinancial reporting and disclosuresfinancial risks and appropriateness of internal controlsrelationship with the external auditor

Auditor Prepares the audit plan Reviews outcomes of the audit examination Provides opinion on the financial statements based on the results of the audit

Audit in More DetailRoles and ResponsibilitiesAn often overlooked document that outlines: What management is responsible for;What Council and/or Audit/Finance Committees are responsible for; and How auditors interact with management and Council.

This is signed off by the Mayor and managementAudit in More DetailManagements Responsibilities81Information on how management has measured transactions and balances disclosed in the financial statements

When there are complex requirements or a choice between policies, it must be disclosedAudit in More DetailSignificant Accounting Policies82This is the only page in the financial statements that belongs to the auditor (dont be confused by who is presenting)Reinforces managements responsibility;Expands on Auditor involvement; Cannot be signed off until accepted by Mayor and Council; andShould not be a qualified opinion.

Audit in More DetailIndependent Auditors Report83

FINANCIAL REPORTINGTERMSFront Page84

Financial Reporting TermsTerminologyCommon Indicators Front Page85Prepared in accordance with Public Sector Accounting Standards (PSAS)

PSAS differs significantly from the basis of accounting used in the Financial Plan

Components of government financial statements:Statement of financial position Statement of operations Statement of changes in net financial assetsStatement of cash flowsSignificant accounting principlesNotes to the financial statements

Financial Reporting TermsTerminologyStatement of financial position Economic resources, obligations and accumulated surplus as at a reporting dateStatement of operations Changes in the governments economic resources and obligations for the period Cost of the organizations service delivery activities for the period and the extent to which these expenses were funded by revenuesStatement of change in net financial assetsShows the extent to which the organizations operations have resulted in an accumulation or depletion of net financial assetsStatement of cash flowsReports the change in cash in the accounting period and how a government financed its activities in the period and met its cash requirementsFinancial Reporting TermsTerminologyFinancial Assets: Economic resources owned by the LG

Liabilities: Amounts the LG owes to others

Net Financial Assets = Financial Assets less Liabilities

Non Financial Assets : Assets that are employed to deliver government services, consumed in normal course of operations, are not for sale in normal course of operations

Accumulated Surplus: Represents net worth. Indicator of overall financial health but does not represent a pool of surplus cash.

Financial Reporting TermsTerminologyRevenues: Increases in the economic resources resulting from operations, transactions and events of the accounting period

Expenses: Decreases in economic resources resulting from operations, transactions and events of the accounting period

Financial Reporting TermsTerminology

2011($000s)2010($000s)2009($000s)

Restricted reserves36,981 30,964 26,103Unrestricted reserves(7,080) (10,846) (12,502)Equity in non financial assets 616,405596,456578,965646,306 616,574 592,566Accumulated surplus:Review of reserves (minimum, maximum amounts)Compare to other cities of comparable taxpayer base sizeCompare trends

Financial Reporting TermsTerminologyNotes to the Financial Statements:Provides more information to support the balances and transactions in the financial statements Financial Reporting TermsTerminology91Net Financial Assets Do you have sufficient net financial assets to pay future liabilities?ReservesDo you have sufficient reserves to cover future operating expense overruns?Tangible Capital assetsDo you have sufficient capital asset resources to allow you to continue to provide services?Do you have an infrastructure deficit?Revenues less expenses (annual surplus)Will revenue cover your expenses for the year or will you be dipping into your reserves? Are you receiving and spending according to budget?Financial Reporting TermsCommon IndicatorsFinancial Reporting TermsCommon Indicators

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finance 101 city of west kelowna thompson-nicola regional district

Documents

proposed transfers

financial planning

financial managementsection

financial operationssection

financial plandivision

year budget year

proposed expenditures

funding sources transfers