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HomeMy WebLinkAboutCS 44/01 --- REPORT TO COUNCIL FROM: Gillis A. Paterson Director, Corporate Services & Treasurer DATE: November 19, 2001 REPORT NUMBER: CS 44-01 SUBJECT: Vacation Pay Reserve and Reserve for Inventory RECOMMENDATION: I. That Report CS 44-01 from the Director, Corporate Services & Treasurer be received; 2. The Vacation Pay Reserve be closed and the estimated balance of $441,350 be transferred to the Self-Insurance Reserve; 3. The Reserve for Inventory be closed and the estimated balance of $245,271 be transferred to Reserve for Rate Stabilization; and, 4. The appropriate officials of the City of Pickering be authorized to take the necessary actions to give effect thereto. ORIGIN: - Director, Corporate Services & Treasurer AUTHORITY: Municipal Act, R.S.O 1990 as amended Section 163 Report to Council CS 13-01 FINANCIAL IMPLICATIONS: Further to the recommendation on Report to Council CS 13-01, the Vacation Pay Reserve is no longer needed as such and it is recommended that it be closed and the estimated balance of $441,350 be transferred into Self-Insurance Reserve. Due to a short fall, the Self-Insurance Reserve had not been replenish for a long time. With this transfer, the new balance for Self- Insurance Reserve will be $972,489. This will provide a more appropriate balance for the Self- Insurance Reserve. The Reserve for Inventory is no longer needed and as such it be recommended that it be closed and the estimated balance of $245,271 be transferred to Reserve for Rate Stabilization. Based on the Current Budget requirement, there is a demand of $400,000 per year for both 2002 and 2003. With this transfer, the new balance for Rate Stabilization Reserve will be $494,410 and this will provide for a more appropriate balance to meet the Current Budget demand for 2002. EXECUTIVE SUMMARY: - Not applicable -- - - to Report to Council CS 44-01 Date: November 19,2001 Subject: Vacation Pay Reserve and Reserve for Inventory Page 2 BACKGROUND: The Reserve for Vacation Pay was established to ensure that the cost of vacation pay earned, but not taken, is correctly allocated to the taxpayers of that year and the Council of that period. The original Reserve for Vacation Pay was set up in 1993 to comply with Section 3001 of the Municipal Financial Reporting Handbook of the Ministry of Municipal Affairs and a contribution of $430,000 was made to the Reserve from General Fund. Based on an increase in accrued vacation pay as at Dee 31, 1995, an additional transfer of $11,350 was made in 1996 from General Fund. The total contribution of $441,350 has remained intact since 1996. This Reserve Fund is no longer needed, as it is no longer necessary to provide for vacation pay earned in this manner as vacations are taken in the year earned. In Report to Council CS 13-01 dated May 28, 2001, it was recommended to transfer the Vacation Pay Reserve to Working Funds Reserve. However, upon careful consideration by the Treasurer , it is more appropriate to transfer this Reserve to the Self-Insurance Reserve to build up higher working capital for Self- Insurance. Council approval is needed to close this Reserve and transfer the funds. In 1984 the Ministry of Municipal Affairs and Housing issued a list of new changes to the municipality's year-end financial report which involved Inventory. The Reserve for Inventory was necessary to ensure that the cost of revolving inventories is correctly allocated to the taxpayers of the year and the Council of that period. The initial year-end transfer of $66,204 in 1984 from General Government has been adjusted annually to reflect the inventories level of the City. The Treasurer has reviewed inventory activities level over the last few years and has concluded that the use of this reserve is minimal and is no longer required. As of December 31, 2000, the balance on this account is $245,271. As it is no longer necessary to provide for Inventory, it is recommended that the Reserve for Inventory be closed and the surplus be transferred to the Reserve for Rate Stabilization to build-up a higher working capital to meet Current Budget demand for 2002. Council approval is needed to close this Reserve and transfer the funds. A TT ACHMENTS: Not applicable Prepared By: Approved/Endorsed By: ~~~ Caryn ong Senior Financial Analyst /~Q~ \ GiTIls A. Paterson Director, Corporate Services & Treasurer GAP: vw Recommended for the consideration of Pickering City Council ~' ( ~,C. / ,.(.-, Tho~s J. Quinn, Chief Administrative Officer v