2017 metro vancouver financial results

2017 Metro Vancouver Financial Results

Performance and Audit Committee, April 11, 2018

Phil TrotzukCHIEF FINANCIAL OFFICER

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METRO VANCOUVER

5.1 Draft Audited 2017 Financial Statements

• Financial Position and Results of Operations• Public Sector Accounting Board (PSAB)

5.2 2017 Financial Results Year-End

• Results of Operations consistent with Annual Budget Format

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2013 2014 2015 2016 2017Regional District $ 3.4 $ 5.1 $ 3.5 $ 3.1 $ 3.6Water District 15.1 17.9 13.1 11.2 17.2Liquid Waste 9.5 9.9 7.9 9.3 8.7Solid Waste 1.6 (3.4) 0.5 2.6 10.8MVHC 1.5 1.4 0.9 1.0 3.9Total $ 31.1 $ 30.9 $ 25.9 $ 27.2 $ 44.2

% of Budget 4.8% 4.7% 3.9% 4.0% 6.3%

2017 RESULTS OF OPERATIONSMetro Vancouver Surplus (Deficit)($ millions)

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

2013 2014 2015 2016 2017

Mill

ions

Regional District Water District Liquid Waste Solid Waste MVHC

• Overall Surplus of $44.2 million• Water District and Solid Waste are main

drivers

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2017 SURPLUS DRIVERSRegional District Surplus• Reduced Board and Committee meeting costs• Deferral of projects to 2018• Staff vacancies

Water District Surplus• Higher than expected water sales and lease revenues• Savings in debt charges – favourable refinancing and lower capital spending• Deferral of some repairs and maintenance projects

Liquid Waste Surplus• Deferral of some minor capital work• Savings in debt charges – favourable refinancing• Reduction in some operating/project costs

Solid Waste Surplus• Higher revenues – higher than expected waste flows• Management of expenditures

MVHC Surplus• Higher rental revenues• Reduced expenditures – revised maintenance contracts, maintenance efficiencies, some deferrals

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SURPLUS RECONCIL IAT ION Financial Statements to Budget

($ millions)

Annual Surplus - Audited Financial Statements 230.2$

Add: Amortization 78.2

Less: Contributions to Capital (128.4) Contributions from Reserves (27.1) Sinking Fund Payments and Income (106.5) Capital Grants (1.9) Other (0.3)

Annual Surplus - Annual Budget Format 44.2$

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2013 2014 2015 2016 2017Total Assets $ 4.6 $ 4.8 $ 5.0 $ 5.3 $ 5.8

Total Liabilities 1.3 1.3 1.3 1.4 1.6

Accumulated Surplus $ 3.3 $ 3.5 $ 3.7 $ 3.9 $ 4.2

F INANCIAL POSIT IONMetro Vancouver Assets and Liabilities (net of Translink and member municipalities)($ billions)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2013 2014 2015 2016 2017

Billi

ons

Tangible Capital Assets Reserves

• Strong Financial Position• Accumulated Surplus, or “Net Worth”,

consist of Reserves and Investment in Tangible Capital Assets.

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2013 2014 2015 2016 2017Current Ratio 3.8 to 1 3.6 to 1 3.2 to 1 4.2 to 1 5.2 to 1

Operating Reserves/Revenue 11.5% 11.9% 10.8% 10.9% 12.9%

Total Reserves $ 506.0 $ 536.4 $ 564.5 $591.2 $ 636.9

L IQUIDITYMetro Vancouver Liquidity Indicators($ millions)

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

2013 2014 2015 2016 2017

Mill

ions

DCC's Reserves

• Very good liquidity• Current ratio (current assets to current

liabilities) - Ability to meet current obligations

• Total Reserves includes DCC’s

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2013 2014 2015 2016 2017Capital Assets $ 3.898 $ 4.094 $ 4.389 $ 4.549 $ 4.795

Debt 0.879 0.886 0.851 0.906 0.945

Equity in Capital Assets $ 3.019 $3.208 $3.538 $3.643 $3.850

EQUITY IN CAPITAL ASSETSMetro Vancouver Capital Assets and Debt (net of Translink and member municipalities)($ billions)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2013 2014 2015 2016 2017

Billi

ons

Capital Assets Debt

• Capital assets increased 23% since 2013, while debt increased 7.5%

• Contribution to Capital and Prior Years Surplus reduces use of debt for needed infrastructure

Questions?

OPERATING, STATUTORY AND DISCRETIONARY RESERVES POLICY

Phil Trotzuk, Chief Financial Officer

25044080Performance and Audit CommitteeApril 11, 2018

Metro Vancouver

GVWD Water Services

GVS&DDLiquid Waste

Solid Waste

MVRD

Air Quality

Electoral Area

E911

Regional Planning

Regional Parks

General Government

Labour Relations

Regional Emergency Management

GPS

Sasamat Fire Protection

MVHC

Affordable Housing

METRO VANCOUVER F INANCIAL STRUCTURE

• Policy Principles• Financial stability, security and sustainability• Consistent with long-term plans, Board and Corporate strategic goals• In accordance with legal requirements

• Consistent with Best Practices of other local governments• Victoria, Burnaby, Regional District of Nanaimo, Fraser Valley Regional District,

West Kelowna, Mission

• Types of Reserves:• Operating Reserves• Statutory Reserves• Discretionary Reserves

Metro VancouverReserves Policy Principles

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• Financial security against an unforeseen financial loss• Revenue shortfall or unexpected expenditure

• Maintained by each legal entity and statutory function

• Minimum requirement• Percentage of net operating costs• Business volume• Inherent risk of volatility of business activities

Metro VancouverOperating Reserves

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• Water - 15% Net Operating Costs• Revenue based on consumption• Expenditures primarily fixed

• Solid Waste - 15% Net Operating Costs• Revenue based on waste volumes• Many expenditures fixed

• Liquid Waste - 10% Net Operating Costs• Revenue – levy from members• Some uncertainty in system operations

• Housing Corporation - 10% Net Operating Costs• Reliant on tenant rents• Unforeseen maintenance

• Regional Functions - 5% Net Operating Costs• Revenue – requisitions from members

Metro VancouverOperating Reserves – Minimum Requirement

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• Legal framework governs the composition and application• Legal statute• Board approved bylaw• Governing agreement with another level of government or entity

• Examples: Liquid Waste DCC’s, cultural grants and park land acquisition

• Contributions• Annual budget contributions• Appropriation of annual surplus

• Usage – only as outlined in legal framework

Metro VancouverStatutory Reserves

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• Established by the Board by legal entity or statutory function• Known or anticipated future obligation

• Examples: Landfill closure, biosolids or fleet vehicles

• Contributions – only through appropriation of annual surplus

• Usage – Board discretion in support of Metro goals and priorities• Usage based on established priority sequence

Metro VancouverDiscretionary Reserves

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• Fund capital expenditures or pay down existing debt

• Fund one-time expenditures

• Rate stabilization for a legal entity or statutory function

• Maintain as a statutory or Discretionary Reserve for future useage

Metro VancouverDiscretionary Reserves / Annual Surplus

Priority Sequence

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• Reserves are only used for the specific entity or function

• Managed by Finance through the Financial Planning Process

• Approved applications must be expended in year of approval or the following year

• Reserves earn interest annually at the internal rate of return on investments

Metro VancouverManagement of Reserves

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Questions?

Procurement Process Roy Moulder, SCMPDIVISION MANAGER, PURCHASING AND RISK MANAGEMENT

Performance and Audit Committee – April 11, 2018

24865206

Procurement 101

• Corporate Procurement Principles• Board Policy• Code of Ethics• Procurement Process• Instruments• Evaluation• Approval• Reporting to Performance and Audit Committee

Procurement Principles• Best Value• Competitive• Open and Transparent• Non-discriminatory• Commitment to Sustainability

Value + Transparency = Competitive Selection Process (CSP)

Policies and Procedures

• Procurement and Real Property Contracting Authority: Board Policy on conducting procurement and real property contracting activities.

• Employee Code of Ethics Policy: Corporate Policy outlining the Corporation’s expectations of an employee where influence over decisions relating to vendor selection exists.

• Procurement and Contracting Employee Procedures: A document that provides details on the how to apply the Procurement and Real Property Contracting Authority Policy.

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Board Policy

Policy outlines the authorization and competition requirements for procuring Goods, Services and Construction for all Metro Vancouver entities.

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Employee Code of Ethics

“…..employees have a responsibility not merely to obey the law, but also to ensure that their conduct will pass public scrutiny”

Conflict of InterestA conflict exists where an employee could:

a) directly or indirectly influence a decision made in the course of performing his/her job duties; orb) directly or indirectly influence a decision through the exerting of personal influence over the decision‐maker

in circumstances in which the outcome of that decision might directly or indirectly benefit the employee.

Solicitation and/or Acceptance of Donations…..employees shall not solicit, or accept unsolicited, donations or gifts, prizes or money from any person, firm or corporation which is interested in doing business with MV.

Rewards and BenefitsEmployees shall not accept commissions, reward, advantage or benefit from any person, firm or corporation which is interested in doing business with MV.

The Procurement Process

• Requisition oversight• Buyer’s role and responsibilities• Competition thresholds and trade agreements• Procurement instruments• Evaluation criteria• Evaluation participants• Awarding of contracts

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Requisition Oversight:

• The client will generate a Purchase Requisition in the new Financial Management System which automatically checks against available budget.

• Requisition approval structure is designed to seek departmental management approval based on the value of the requisition.

• No procurement process will be initiated without budget.

Buyer’s Role• Collaborate with client to select the most advantageous procurement

model• Administers the Competitive Selection Process• Puts the CSP package together and issues – client input is key• Point of contact for all potential bidders/respondents• Facilitates the evaluation process• Point of contact for award notification, regrets, schedules debriefings

Competition Thresholds and Trade Agreement Obligations

> $5,000 Competitive Bids (Invitational)> $75,000 Goods and Services

$200,000 Construction = Formal Competitive Selection Process

Formal CSP to meet Trade Agreement ObligationsNew West Partnership Trade Agreement (NWPTA)Canadian Free Trade AgreementComprehensive Economic and Trade Agreement (CETA)

Procurement Instruments

• Invitation to Tender (ITT) ***• Request for Proposal (RFP) ***• Request for Pre-Qualification (RFQ)• Expression of Interest (EOI)• Request for Information (RFI) - Market Sounding• Notification of Intent to Contract (NOIC)

Tenders/Proposals

Tenders• Offer in accordance with

owner’s specifications• Comparative evaluation

involves consideration of price only

Proposals• Offer includes Proponent’s

solution/methodology• Comparative evaluation of

competitive proposals involves several criteria including price

Both Communicate offers which are open to acceptance resulting in a contract (Contract “A”)

Evaluation Criteria• As part of the RFP drafting, staff generate the criteria

and the appropriate weighting under which proposals will be evaluated.

• Senior management retain oversight of the evaluation criteria and weightings.

If the anticipated contract value is:> $1 million – Director oversight> $5 million – General Manager oversight

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Evaluation Participants• Expectations are that, at minimum, 3 staff evaluate the compliant

submissions along with a buyer who evaluates the financial component.

• The number of evaluators may vary depending on the value and complexity of the competition.

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Awarding of Contacts - Contracting AuthorityAmount Contracting Authority< $250,000 Buyers< $500,000 Division Manager Purchasing & Risk Mgmt. with approval from

General Manager < $2,000,000 Chief Financial Officer with approval from

General Manager, and Division Manager, Purchasing & Risk Mgmt.

< $5,000,000 Chief Administrative Officer with approval from

Chief Financial OfficerGeneral ManagerDivision Manager, Purchasing & Risk Mgmt.

> $5,000,000 Board approval required 15

Awarding of Contracts

• The value of the award dictates the contracting authority.

• Management review of RFP awards operate under greater scrutiny than other procurement instruments.

• Any award valued $500,000 and greater require CAO authority.

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Reporting to Performance & Audit Committee

• Report all new awards and change orders in excess of $500,000

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Questions?