HomeMy WebLinkAboutFIN 02-13
CLtlf O~ Report To
Council
PICKERING Report Number: FIN 02-13
Date: February 25, 2013
From: Paul Bigioni
Director, Corporate Services & City Solicitor
Subject: 2013 Current Budget and Financial Statements
Excluded Expenses Reporting as Required by Ontario Regulation 284/09
Recommendation:
1. That Report FIN 02-13 of the Director, Corporate Services & City Solicitor be
received; and,
2. That Report FIN 02-13 of the Director, Corporate Services & City Solicitor
regarding the exclusion of certain expenses from the 2013 Budget be adopted in
accordance with the provisions of Ontario Regulation 284/09 of the Municipal Act
2001.
Executive Summary: Under Ontario Regulation 284/09, municipalities are required
to report on whether amortization expense, post-employment benefits and other
expenses are included in the annual current budget. This Regulation allows a
municipality to exclude estimated expenses for these items from the 2013 annual
budget, however, the munici.pality is required to report on the financial effects. The
required reporting provides a reconciliation between the budget preparation method
(cash flow) and the Public Sector Accounting Board (PSAB) standards for financial
statement reporting purposes. Adoption of this report by Council fulfills the reporting
requirements of the Regulation. Financial Implications: There is no financial impact from the exclusion'of these
expenses as the annual budget is prepared on a cash flow basis. This document
provides an accounting reconciliation between the two reporting methods employed in
the annual Current Budget and the 2013 Audited Financial Statements..
Discussion: Ontario Regulation 284/09 (O. Reg. 284/09) under-the Municipal Act,
2001, S.O. 2001, C. 25 as amended, allows a municipality to exclude expenses from
the 2013 Budget for the following:
i Amortization expenses
ii Post-employment benefit expenses
Starting with the 2009 year end, accounting standards and reporting requirements have
changed dramatically; most significantly with the introduction of tangible capital asset
accounting. The new accounting standards, however, do not require budgets to be
Report FIN 02-13 Date: February 25, 2013
Subject: 2013 Current Budget and Financial Statements Page 2
Excluded Expenses Reporting as Required by Ontario
Regulation 284/09
prepared on the same basis. The City of Pickering, like most municipalities, continues
to prepare budgets on the traditional cash basis, which provides a clear and concise
understanding of critical budget information.
The annual budget process is an important municipal exercise that considers plans for
the current and future activities of the City. One of the main outcomes of this process is
to set the tax rate which Council is asked to approve. The tax rate is determined by the
cash basis of accounting and does not include PSAB reporting requirements or accrual
accounting and accounting for non-financial assets and liabilities such as amortization
(depreciation) and post-employment benefits.
Amortization Expenses
By definition, amortization expense, frequently referred to as depreciation, in its simplest
terms, is defined as the annual expense or use of the asset over its estimated useful
life. Amortization expense is a tool used by financial professionals to predict the future
annual financial commitment required for asset replacements. For 2013, the estimated
amortization expense is $9.734 million, based upon net assets of $187.7 million.
Post-Employment Benefit Expense
Post-Employment Benefit expense represents the change in the accrued benefit liability
for both post-retirement extended healthcare benefits and accrued sick leave
entitlement. Since the City is self insured for the purpose of workplace injury claims, it
also represents the accrued liability for Workplace Safety and Insurance Act Benefits.
PSAB standards do not require liabilities associated with these benefits to be fully
funded, however, actuarial reviews are conducted to estimate these unfunded liabilities
which are projected to increase by approximately $634,000 for 2013.
Financial Summary
The estimated change in the accumulated surplus of the City for 2013 resulting from the
exclusion of these expenses from the budget is as follows:
PSAB Additions to 2013 Budget (Reduces Surplus - expenses that were
excluded)
Amortization $9,734,000
Post-Employment Benefits 634,000
Total PSAB Additions $10,368,000
Report FIN 02-13 Date: February 25, 2013
Subject: 2013 Current Budget and Financial Statements Page 3
Excluded Expenses Reporting as Required by Ontario
Regulation 284/09
PSAB Reduction to 2013 Budget (Increases Surplus)
Tangible Capital Asset Acquisition $(14,003,781)
Debt Principal Payments (3,939,766)
Total PSAB Reductions $(17,943,547,)
Net (Increase) Decrease in Accumulated Surplus $(7,575,547)
Attachments: Not applicable
Prepared By: Approved / Endorsed By:
James Halsall ~ Stan Karwowski (Acting) Manager, Budgets & (Acting) Division d, Finance & Treasurer
Internal Audit
i t
Paul Bigioni
Director, Corporate e ice & City Solictor
Recommended for the consideration of
Pickering City Council
Tony Prevedel, P.Eng.
Chief Administrative Officer