Municipal Finances

Municipal Orientation 2016

Fredericton, NB

Presentation Overview

• Budgeting and Financial Reporting

• Borrowing and Long-term Financing

Definition

Municipality

• For the purposes of this presentation, the word

municipality includes city, town, village, rural

community and regional municipality

Budgeting and

Financial Reporting

Types of Funds

MUNICIPAL COUNCIL

GENERAL OPERATING FUND

GENERAL CAPITAL FUND

UTILITY OPERATING FUND

UTILITY CAPITAL FUND

RESERVE FUNDS

Accounting and Reporting Objectives

• Budgeting in conformity with the Municipalities Act

• Reporting to Council

– GAAP

– PSAB

– Municipalities Act

• Fulfilling the Municipality’s duty to be publicly accountable

• Evaluating the operating results of the Municipality

• Communicating with the Municipal treasurer/administrator

• Internal Controls

Accounting Standards

• GAAP (generally accepted accounting

principles)

– Annual Auditing Statement

– Profit Entities

– Consolidation

• Fund Accounting

– Cash Flow Type

Annual Financial Statements

• Fiscal Year is Calendar Year

• Must be PSAB compliant

• Must be Audited – GAAS

• Notes are an integral part

• Formally approved by Council

• Public Document

• Fund accounting

Role of Treasurer 77. Chief Financial Officer:

• collect, receive and deposit money

• open bank accounts

• keep the (financial) books

• custodian of all financial documents

• prepare year end statements for audit

• prepare periodic statements for council review

• insurance protection

• advise council on financial matters

• other duties as assigned

78. Mayor or council appointee signs cheques with Treasurer

The mayor or such other person as the council appoints, shall sign jointly with the treasurer all cheques issued by the municipality.

Seven Steps in Budget Process

1. Establish a Budget Calendar

2. Request Input from Others

3. Collect Necessary Information

4. Review Information and Prepare Draft Budget

5. Review Draft and Make Changes

6. Approval by Council and Submission to ELG

7. Approval by Department (Minister of ELG)

Budget Process

Who is Involved?

• Staff – Department Heads, Supervisors

• Treasurer / Accounting Staff

• Management Team

• Finance Committee (if applicable)

• Council

BUDGET

Revenues Expenses

Budgeting

What is a budget?

• Financial Plan

• Various budgets/multi-year budgets (Capital Plan)

• Authority to spend money

• Public documents

Operating Fund Budget

• Prepared Annually

• Approved by Council resolution at a regular

meeting

• Establish tax rate for General Operating Fund

• Establish user fees for Utility Operating Fund

• Submitted to Minister of ELG on prescribed

forms

Revenues

Services rendered to other governments:

• Protection services – Fire

• Transportation services – Summer and winter

maintenance

Revenues

Sale of services:

• Arena

• Cultural centre and facilities

• Pool and beaches

• Amusement parks

Revenues

Other sources of self-revenue:

• Licences and permits

• Building permits

• Fines

• Leasing of buildings

Revenues

Other transfers:

• Surplus from second previous year

• Transfers from other funds (water and sewer)

Expenses

General administration services:

• Legislative services

• General administration

Expenses

Protection services:

• Police services

• Fire protection services

• Other – Animal control

• Emergency Measures

Expenses

Transportation services:

• Common services – Administration,

engineering, workshops, etc.

• Road transportation – Summer maintenance,

ditches, winter maintenance, street illumination,

plaques, etc.

Expenses

Sanitary services:

• Solid waste removal

• Regional Service Commissions

Expenses

Community planning, land use planning

and development:

• Community planning – Commission

• Land use development

• Regional development commissions (industrial

parks, etc.)

• Other – Tourism (Tourism Bureau, tourism

promotion, downtown, etc.)

Expenses

Cultural and recreational services:

• Administration

• Rinks and arenas

• Parks and playgrounds

• Historic sites

• Libraries

• Pools, beaches, marinas

Expenses

Financial services:

• Debt service – Interest and principal

• Banking fees

• Discounts on debentures

• Contribution to the General Capital Fund

• Deficits from second previous year

Mandate to cover through local

tax • Total budget (expenses) $7,660,000

• Less: Non-tax revenues $1,500,000

• Net budget $6,160,000

• Less: CFEG $625,000

• Mandate to cover through local tax $5,535,000

• Mandate to be covered $5,535,000

• Divided by tax base $374,300,000

• Tax rate $1.4784/100

• Thus, every .01$ of tax pays for $37,400 in municipal expenses.

Capital Budget

• Annual multi-years

• Asset Management Plan

• Debt charges

• Capital Expenditures as defined by the Municipal Capital Borrowing Board (MCBB)

Best Practices

• Year Round Planning

• Budget for revenues and expenditures, not tax

rates

• Start with expenses – Planning for each

program and service

• Forecast revenues – by source and type

• Include long-term and short-term plans

• Citizenship engagement

Questions

• Your administrator/treasurer

• Other municipalities (i.e. AMANB List Serve)

• Community Finances Branch at ELG

• Your auditor

Capital Borrowing and

Long-term Financing

Overview

• Municipal Capital Borrowing Board (MCBB)

• Process Summary

• Application, by borrower

• Board Hearing

• Ministerial Approval

• Long-term financing

• Resources

• Key Message

Capital Borrowing

Municipal Capital Borrowing Board

Mandate

• The mandate of the Municipal Capital Borrowing

Board (MCBB) is to monitor and authorize long-

term capital borrowing of municipalities and

commissions.

Members

• Six senior civil servants are appointed to the

Board by the Lieutenant-Governor in Council

under authority of the Municipal Capital

Borrowing Act.

Process Summary

1. Council resolution

2. Application to MCBB (Documents required)

3. Notice of public hearing(advertised in newspaper)

4. Application analysis

5. Public hearing

6. Ministerial approval

Application, by borrower

• Resolution of Council approving five year

capital plan

• Authorization to borrow from MCBB

• Resolution of Council for borrowing amount

Board Hearing

• Borrowing for legitimate capital expenses

• Amount within legislated limits

• Policies must be respected

• Must be financially able to undertake

borrowing

• Notice of hearing complies with legislation

• Objections may be provided by the public

Ministerial Approval

• Must have approval from ELG before project

can begin

• Interim financing can be obtained

Long-term Financing

Authority for Long-term Financing

• Once project (or phase of a larger project) is completed

and final cost are known, arrangements for long-term

financing can be made.

• Resolution of Council for the Application for Financing

• Municipalities can only borrow long-term funds from

their own reserve funds, the provincial or federal

government, or the New Brunswick Municipal Finance

Corporation (NBMFC - Debentures)

• Debentures are issues semi-annually (spring and fall)

• Completion of “Application for Financing” form

• “Application for Financing” form signed by Clerk and

forward to ELG

Resources

• Municipalities Act

• Municipal Capital Borrowing Act

• New Brunswick Municipal Finance Corporation Act

• Regional Service Delivery Act

• Guide to Municipal Capital Borrowing – http://www2.gnb.ca/content/dam/gnb/Departments/lg-

gl/pdf/GuideToMunicipalCapitalBorrowing.pdf

Questions

• Your administrator/treasurer

• Community Finances Branch at the ELG

www.gnb.ca

Role of Council Overview

• Approval of five year capital plan

• Approval of yearly budget

• Approve the audited financial statements

• Approve borrowing

• Transfer to and from reserves

• Awarding contracts following procurement policies

and legislation

• Ask questions!!

• Accountable to citizens!!

Key Message / Best Practices

• Planning … planning … planning

Have a capital plan

Start your budgeting process early

Borrowing authority is valid for two years. You can

come to the Board once for all projects planned for

the year

• Don’t commit to projects without approval from the

Municipal Capital Borrowing Board (MCBB)

• Take into consideration inflation rates and future

needs when looking at tax rate and user fees

• Be informed! and Be transparent!