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Staff Report
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Report To: General Government Committee
Date of Meeting: April 17, 2023 Report Number: FSD-019-23
Submitted By: Trevor Pinn, Deputy CAO/Treasurer
Reviewed By: Mary -Anne Dempster, CAO Resolution#:GG-095-23
File Number:
Report Subject: Multi -Year Budget Policy
Recommendations:
By-law Number:
1. That Report FSD-019-23 and any related delegations or communication items, be
received;
2. That the Draft Multi -Year Budget Policy attached to Report FSD-019-23, as
attachment 1, be approved;
3. That Policy G14 "Budget Policy" be rescinded; and
4. That all interested parties listed in Report FSD-019-23 and any delegations be
advised of Council's decision.
Municipality of Clarington
Report FSD-019-23
Report Overview
Page 2
During the 2023 Budget, Council directed Staff to review the current budget policy regarding
making recommendations toward a multi -year budget. Staff have reviewed multi -year budget
policies established by Ontario Municipalities and have prepared a draft Multi -Year Budget
Policy to replace the current Budget Policy.
1. Background
1.1 At its meeting on January 30, 2023, General Government Committee passed resolution
#GG-070-23 which was the 2023 Budget report as amended. Part of the resolution
included the following: "That Financial Services review the current Budget Control Policy
and provide recommendations, if applicable, to Council, including the development of
multi -year budgets and a dedicated infrastructure levy..."
1.2 This report addresses the Budget Control Policy and the adoption of multi -year budgets.
These topics will be brought to Committee separately.
Legislative Authority for Multi -year Budgets
1.3 Section 291 of the Municipal Act, 2001, states that "a municipality may 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."
Therefore, this section permits Council to adopt a budget of up to five years,
theoretically 2024 to 2028.
1.4 In the situation where the first year of a multi -year budget follows an election (ie. the
2023 fiscal year), the budget may only be adopted in the year to which it applies. As the
2023 budget was a single -year budget, section 291(2) does not apply.
1.5 Section 291(4) requires Council to review, make changes as needed, and readopt the
budget each year. This may occur in the year before the year in which the budget is
effective; this would allow the annual updates to occur in the fall prior to the start of the
fiscal year.
1.6 If a year for which a budget is being reviewed or changed is a year immediately
following a year in which there is a regular election, Section 291(5) requires that the
budget can only be readopted in the year for which it applies.
1.7 As an example, Council may adopt a five-year budget for 2024 to 2028. In December
2024 and 2025, the annual updates may be approved by Council for the 2025 and 2026
fiscal years. The update for the 2027 fiscal year can only be approved after January 1,
Municipality of Clarington Page 3
Report FSD-019-23
2027, as there is a new Council; the 2028 budget could then be readopted in December
2027.
Examples of Multi -Year Budgets
1.8 In March 2020, the City of London approved their first multi -year budget for the years
2020 to 2023. An update budget update report was presented to Council for ratification
each year.
1.9 The City of London's Annual Budget Update includes summary information, overview,
and budget amendment recommendations to be adopted. The budget amendments may
result from new legislation, service level enhancements/reductions, growth assumption
changes, contractual changes, new services or other changes. The City's update report
separately identifies each amendment and details the rationale for the difference.
1.10 The City of Guelph developed a 2022/2023 Multi -year Budget. The 2023 update was
presented for readoption in 2023, the year after the election. The confirmation report
included information on in -year Council approvals impacting the 2023 budget,
Legislated changes, Other 2023 updates, user fee changes and updated taxes -in -lieu
and property tax revenues.
2. What Is Multi -Year Budgeting
2.1 A multi -year budget can link Council's Strategic Plan, the Asset Management Plan,
Development Charges Study, and master plans with funding requirements outlined
within the budget. Benefits of multi -year budgeting include:
• Alignment of longer -term goals and objectives with longer -term financial plans;
• Greater certainty and predictability to taxpayers about the future direction of taxes
and the timing of implementation of the Strategic Plan, Asset Management Plan, and
Development Charges Study;
• Improved accountability and transparency over spending plan changes; and
• Prioritization principles aligned with service delivery principles.
2.2 Following the annual budget update process will assist in ensuring the multi -year budget
process is a success. The annual budget update will focus on the following changes:
• New or Changed Regulation — a new or changed legislation or regulation with a
financial impact to the Municipality. An example would be changes to the minimum
maintenance standards that require additional resources, or a change to the building
code which may require additional inspectors.
Municipality of Clarington
Report FSD-019-23
Page 4
• New Council Direction — a new Council direction that has transpired after the
approval of the multi -year budget. An example would be that Council wishes to
provide expanded hours at recreation facilities.
• Cost or Revenue Drive — a corporate or service area budget adjustment due to
changes in economic conditions.
3. Draft Policy
3.1 The draft policy applies to all Municipality of Clarington departments and boards.
3.2 The policy replaces the current Budget Policy G14 which was adopted in 2019 through
resolution #C-226-19. The draft Multi -year Budget Policy gives the Treasurer authority
to provide funds pro-rata until the budget or annual update is passed.
3.3 The draft policy does not include requirements for a specific date that the budget will be
passed or a particular reference to tax levy targets. The draft policy indicates that it is
Council's responsibility to establish budget guidelines through budget policy and other
financial documents. Staff will prepare an annual report to recommend budget
guidelines for the initial multi -year budget as well as each yearly update which will
include dates for the budget deliberations.
3.4 Staff intends to move the budget process in the late fall to provide for improved timing
on procurements, known resources for the full year and closer alignment with best
practices.
3.5 Financial management controls will be included in a separate "Financial Management
Policy" which will be brought to Committee. This policy will consolidate several existing
policies regarding financial controls, debt, reserve and reserve funds, and expenses into
one policy to provide a clear approach for financial management. The Multi -Year Budget
policy is a stand-alone policy to set the budget, monitoring spending and adjustments in
the year will be covered through the Financial Management Policy.
3.6 The Draft Policy considers three types of budget changes, an administrative change, a
reportable change and a material change. Administrative changes have a net zero
impact to the service area/department and are less than 0.05 per cent of the tax levy.
3.7 Reportable changes also have net zero impact to the tax levy, may include use of
reserve or reserve funds and are equivalent to between 0.05 percent and 0.49 per cent
impact to the tax levy. These changes are presented to Council for approval during the
annual update.
Municipality of Clarington Page 5
Report FSD-019-23
3.8 Material changes are those with an impact equivalent to greater than 0.50 per cent of
the tax levy. These changes require Council to consider reprioritization, review or
reconsideration of the tax levy for the year.
4. Financial Considerations
4.1 This report does not directly have any financial implications.
4.2 Adopting a multi -year budget process provides for longer -term financial planning,
predictability, and stability in tax levy changes as well as identifying the resources
required to meet the strategic priorities of Council.
4.3 The budget process identifies the financial resources required to provide services and
invest in municipal infrastructure.
5. Concurrence
This report has been reviewed by the Senior Leadership Team who concur with the
recommendations.
6. Conclusion
It is respectfully recommended that Council adopt the Multi -Year Budget Policy and
rescind the existing Budget Policy.
Staff Contact: Trevor Pinn, CPA, CA, Deputy CAO/Treasurer, 905-623-3379 ext. 2602 or
tpinn@clarington.net.
Attachments:
Attachment 1 — Draft Multi -Year Budget Policy
Interested Parties:
There are no interested parties to be notified of Council's decision.
Council Policy
Clarftwju
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Number:
CP-00#
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:
Click or tap to enter a date.
Effective Date:
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Revised Date:
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Applicable to:
All Staff
1. 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.
2. 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.
3. 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.
4. Definitions:
4.1. 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
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Council Policy
Clarington
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projects with similar funding and can be realigned with the approved Multi -year
Budget period.
4.2. 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.
4.3. Budget — An estimated financial plan of revenues and expenditures for a
defined period.
4.4. Budget Year — The period January 1 to December 31, as defined in the
Municipal Act, 2001.
4.5. Capital Budget — A budget that funds new infrastructure projects as well as
expands and maintains existing infrastructure.
4.6. Initial Budget — The first budget in the multi -year budget cycle.
4.7. 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
4.8. Multi -year Budget — Approval of a four-year operating and capital budget.
4.9. Multi -year Budget Policy — Refers to this Policy.
4.10. Municipal Act — Refers to the Municipal Act, 2001, as amended.
4.11. Municipality of Clarington — The Corporation of the Municipality of
Clarington
4.12. 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.
4.13. Operating Budget — A budget that funds the day-to-day operations of
the Municipality.
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4.14. 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.
4.15. 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.
4.16. Service — An organizational unit of the Municipality, possibly a
department or division, which is functionally unique its delivery of service.
4.17. Treasurer — The individual appointed by the Municipality as Treasurer in
accordance with the Municipal Act, 2001.
5. Policy Requirements:
General
5.1. A Multi -Year Budget is developed covering a four-year period beginning in the
second year of a new Council term.
5.1.1. 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.
5.1.2. 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.
5.2. 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.
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5.3. 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.
5.4. 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
5.5. Throughout the Multi -Year Budget process, business plans will be modified for
material changes that result from any material amendments through annual
updates.
5.6. 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.
5.7. 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.
5.8. 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:
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5.8.1. New or Changed Regulation — A new or changed legislation or
regulation with a financial impact to the Municipality.
5.8.2. New Council Direction — A new Council direction that has transpired
after the approval of the Multi -Year Budget.
5.8.3. Cost or Revenue Driver — A corporate or service area budget
adjustment because of changes in economic conditions.
5.9. 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
5.10. There is an opportunity for Services to realign the budget, provided it has
a net zero impact and is administrative in nature.
5.11. 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.
5.12. 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.
5.13. 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.
5.14. Capital projects that are similar in nature and have a similar or
interchangeable funding source.
Reportable Change Process
5.15. 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.
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5.16. Any changes will not have an impact on the property tax levy or the user
fee rates and charges or service levels.
5.17. 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.
5.18. Changes will be approved by Council through the annual budget update
process.
Material Change Process
5.19. A material change crosses the threshold of 0.50 per cent of the property
tax levy or a capital project $500,000 or greater.
5.20. Budget requests and capital projects will be reviewed, and possible re -
prioritization may occur to accommodate the material change within the
existing approved budget.
5.21. Changes may have an impact on the property tax levy or the user fees,
rates and charges or service levels.
5.22. All material changes will be presented to Council through the annual
budget update process and will require Council approval.
6. 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.
6.1. Council is responsible for:
6.1.1. Establishing priorities through the Strategic Plan.
6.1.2. Establishing budget guidelines by way of Budget Policy and other
financial policy documents.
6.1.3. Reviewing, deliberating and approving the Budget
6.1.4. Approving the rates required for taxation and user fees by by-law.
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6.2. Chief Administrative Officer (CAO) is responsible for:
6.2.1. Directing, in co-operation with the Treasurer and the Senior Leadership
Team, the preparation and presentation of the Budget to Council.
6.2.2. 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.
6.3. Deputy CAO/Treasurer is responsible for:
6.3.1. Planning, leading, and coordinating the overall preparation,
engagement, communication, and administration of the Budget, both
internally and externally
6.3.2. Ensuring adherence to budget policies and financial policies as
approved by Council.
6.3.3. Developing the funding strategies for the financing of the Budget.
6.3.4. Coordinating with Local Boards and Agencies to incorporate their
budget requirements into the Budget and forecasts.
6.4. Directors are responsible for the following within their scope of authority:
6.4.1. Reviewing and approving the annual budget strategy.
6.4.2. Reviewing and recommending a Departmental Budget that is aligned to
the Strategic Plan to Council.
6.4.3. Each Deputy CAO or Director and the CAO are accountable for their
individual respective service area budgets.
6.4.4. Recognizing the priorities of the Municipality as a whole, separate from
specific departmental priorities, during the decision -making process.
6.4.5. 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.
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6.4.6. Supporting transparent and open communication of budget performance
and financial risks to Council.
6.5. Managers are responsible for the following within their scope of
authority:
6.5.1. 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.
6.5.2. Developing service business plans that identify operating and capital
resource requirements to address changing service delivery needs and
implementation of Strategic Plan initiatives.
6.5.3. Ensuring that the resources and assets under their authority are
effectively managed on an ongoing basis.
6.6. All Staff are responsible for:
6.6.1. Ensuring that resources are utilized within the parameters set by the
Council -approved budget.
7. Related Documents:
7.1. Not Applicable
8. Inquiries:
Manager, Financial Planning/Deputy Treasurer
9. Revision History:
Date Description of Changes Approved By