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HomeMy WebLinkAboutMulti-Year Budget Policy.docxNumber: CP-002 Title: Multi-Year Budget Policy Type: Financial Management Sub-type: Click or tap here to enter text. Owner: Financial Services Financial Planning Approved By: Council Approval Date: May 1, 2023 Effective Date: May 1, 2023 Revised Date: Click or tap to enter a date. Applicable to: All Staff  Legislative or Administrative Authority: This policy was developed in accordance with Section 291 of the Municipal Act, 2001, which authorizes a municipality to prepare and adopt a budget covering a period of two to five years in the first year to which the budget applies or in the year immediately preceding the first year to which the budget applies. Purpose: The purpose of this policy is to define the procedures for multiple-year budget approvals. The policy defines the budget planning timeframe as a minimum four-year outlook to support stable and efficient financial management and predictable taxation and user rates for stakeholders. Scope: The scope of multi-year budgeting, including both operating and capital, extends to all Municipality of Clarington departments and boards and applies to both tax-supported as well as user fee-supported budgets. Definitions: Administrative Changes – Adjustments in future years of a Multi-year Budget categorized as “housekeeping” items whereby budget funds can be reallocated within Services to realign the existing Operating Budget and have a net zero impact to the tax or user rates levied. Capital budget “housekeeping” items are defined as items less than $100,000 having a net zero impact, are similar projects with similar funding and can be realigned with the approved Multi-year Budget period. Boards and Agencies – Groups outside the Corporation, typically (although not always) funded by the property tax base, which provide specific and/or specialized services to the community in Clarington. Budget – An estimated financial plan of revenues and expenditures for a defined period. Budget Year – The period January 1 to December 31, as defined in the Municipal Act, 2001. Capital Budget – A budget that funds new infrastructure projects as well as expands and maintains existing infrastructure. Initial Budget – The first budget in the multi-year budget cycle. Material Changes – An individual item or summation of Operating Budget items that would have an annual impact of 0.50% to the property tax levy and payment in lieu of taxes to be levied in a future years’ Budget. Material changes may result in a change to the approved levy or user rates. A capital project or summation of Capital Budget projects that would have an annual impact greater than $500,000 Multi-year Budget – Approval of a four-year operating and capital budget. Multi-year Budget Policy – Refers to this Policy. Municipal Act – Refers to the Municipal Act, 2001, as amended. Municipality of Clarington – The Corporation of the Municipality of Clarington Net Budget – The net budget is the cost to deliver Clarington’s programs and services, after accounting for all non-tax/non-rate revenues and subsidies received. This is the portion of the budget paid for through property taxes. Operating Budget – A budget that funds the day-to-day operations of the Municipality. Reportable Changes – An individual Operating Budget item that would have an annual impact between 0.05% and 0.49% to the property tax change and payment in lieu of taxes to be levied in a future years’ Budget and is managed within the existing approved budget, with no change to the approved levy increase or user rate increase. A capital project adjustment with a net $0 impact and less than $500,000. Senior Leadership Team – The senior management team of the Municipality consisting of the Chief Administrative Officer (CAO) and the heads of the Municipality’s departments. Service – An organizational unit of the Municipality, possibly a department or division, which is functionally unique its delivery of service. Treasurer – The individual appointed by the Municipality as Treasurer in accordance with the Municipal Act, 2001. Policy Requirements: General A Multi-Year Budget is developed covering a four-year period beginning in the second year of a new Council term. Annual updates for years two and three will be brought forward for Council consideration during the remaining Council term. The first year of a new Council term will reconfirm the fourth year of the Multi-Year Budget. In the first year of a new Council term, Council will develop its Strategic Plan. Council will approve a four-year average annual tax levy adjustment from rates that address municipal inflationary pressures and funding for additional investments that are aligned with Council’s Strategic Plan. After Council approves the Strategic Plan and the Multi-Year Budget, the Senior Leadership Team will prepare corporate business plans that clearly outline the current state and future direction of each service. The business plans will identify the strategies and priorities that are driving the strategic direction of the service. All strategies and priorities must be aligned with the Council’s Strategic Plan and the funding approved through the Multi-Year Budget. The Treasurer, or designate, may release budget funds prior to a new Multi-Year Budget or annual budget update approval up to a prorated amount based on the previous fiscal year’s approved budget. Such authorization will continue for a reasonable period of time until budget approval of a new Multi-Year Budget or Annual Budget Update. Budget Adjustments Throughout the Multi-Year Budget process, business plans will be modified for material changes that result from any material amendments through annual updates. The Senior Leadership Team will present to Council a budget that is in compliance with the Municipal Act, 2001. The budget will contain adjustments to reflect inflationary pressures and additional investments or disinvestments that would further adjust the budget requirement. Each additional investment or disinvestment submitted for Council consideration shall be supported with a comprehensive business case. In the first year of a budget cycle, the Senior Leadership Team will be seeking approval of a Multi-Year Budget for a four-year period. Commencing in the second year and in each subsequent year of the multi-year budget, Council is required by the Municipal Act, 2001 to review and readopt the budget for that year. As part of the review process, Council is required to make changes that are required for the purpose of making the budget compliant with the provisions of the Act which include ensuring that the municipality has sufficient funds to pay all debts, amounts required for sinking funds or retirement funds and amounts required for boards, commissions or other bodies. As such, Council will have the opportunity to make other amendments to the budget annually. In addition to the matters required to be addressed by the Municipal Act, 2001, the scope of annual budget changes may include, but are not limited to, the following: New or Changed Regulation – A new or changed legislation or regulation with a financial impact to the Municipality. New Council Direction – A new Council direction that has transpired after the approval of the Multi-Year Budget. Cost or Revenue Driver – A corporate or service area budget adjustment because of changes in economic conditions. Proposed changes to future years’ operating budgets should only be brought forward and approved once per year. Adjustments are limited to one per year, during the annual update period, to ensure that all requests are considered together. Administrative Change Process There is an opportunity for Services to realign the budget, provided it has a net zero impact and is administrative in nature. It is not permissible to create new programs, or implement new fees, as by definition, the changes must be administrative and have no impact to service levels. Any changes must be a reallocation of one expense to another expense, or from one revenue source to another revenue source, thereby having no overall financial impact. Changes affecting both revenues and expenses with a net zero impact will be approved by a member of the Senior Leadership Team and the Deputy CAO/Treasurer. Capital projects that are similar in nature and have a similar or interchangeable funding source. Reportable Change Process There is an opportunity for Services to make budget adjustments providing the net amount is between 0.05 per cent and 0.49 per cent of the property tax levy or a capital project between $100,001 and $499,999. Any changes will not have an impact on the property tax levy or the user fee rates and charges or service levels. Any net increase, or decrease, in the budget will be managed through efficiencies with offsetting expense reductions or through reserve transfers or grant funding. All changes are accommodated within the approved budget. Changes will be approved by Council through the annual budget update process. Material Change Process A material change crosses the threshold of 0.50 per cent of the property tax levy or a capital project $500,000 or greater. Budget requests and capital projects will be reviewed, and possible re-prioritization may occur to accommodate the material change within the existing approved budget. Changes may have an impact on the property tax levy or the user fees, rates and charges or service levels. All material changes will be presented to Council through the annual budget update process and will require Council approval. Roles and Responsibilities: Roles and Responsibilities section should be organized by the position, department, or committee that has certain required responsibilities in maintaining compliance and implementing the policy. Council is responsible for: Establishing priorities through the Strategic Plan. Establishing budget guidelines by way of Budget Policy and other financial policy documents. Reviewing, deliberating and approving the Budget Approving the rates required for taxation and user fees by by-law. Chief Administrative Officer (CAO) is responsible for: Directing, in co-operation with the Treasurer and the Senior Leadership Team, the preparation and presentation of the Budget to Council. Exercising financial control over all corporate operations in conjunction with the Treasurer and the Senior Leadership Team to ensure compliance with the Council-approved Budget. Deputy CAO/Treasurer is responsible for: Planning, leading, and coordinating the overall preparation, engagement, communication, and administration of the Budget, both internally and externally Ensuring adherence to budget policies and financial policies as approved by Council. Developing the funding strategies for the financing of the Budget. Coordinating with Local Boards and Agencies to incorporate their budget requirements into the Budget and forecasts. Directors are responsible for the following within their scope of authority: Reviewing and approving the annual budget strategy. Reviewing and recommending a Departmental Budget that is aligned to the Strategic Plan to Council. Each Deputy CAO or Director and the CAO are accountable for their individual respective service area budgets. Recognizing the priorities of the Municipality as a whole, separate from specific departmental priorities, during the decision-making process. Maintaining a culture of data-driven decision-making that is a result of appropriate internal collaboration, alignment to the Strategic Plan, business case option assessment, and risk management. Supporting transparent and open communication of budget performance and financial risks to Council. Managers are responsible for the following within their scope of authority: Developing and recommending, individually, an itemized multiple-year service budget and forecast to the Senior Leadership Team in accordance with established guidelines, timelines, and process. Developing service business plans that identify operating and capital resource requirements to address changing service delivery needs and implementation of Strategic Plan initiatives. Ensuring that the resources and assets under their authority are effectively managed on an ongoing basis. All Staff are responsible for: Ensuring that resources are utilized within the parameters set by the Council-approved budget. Related Documents: Not Applicable Inquiries: Manager, Financial Planning/Deputy Treasurer Revision History: Date Description of Changes Approved By