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Home My WebLink AboutFIN 16/99 - ,t\~ OF P,C ;O_~ iE :~: ~ ~ REPORT TO COUNCIL FROM: Gillis A. Paterson Director of Finance & Treasurer DATE: June 17, 1999 REPORT NUMBER: FIN 16-99 SUBJECT: 1998 Pre-Audit Balances of Reserves and Reserve Funds RECOMMENDATION: It is recommended that this Report No. FIN 16-99 be received by Council for information. ORIGIN: Report submitted annually to Council ",.... AUTHORITY: Municipal Act, R.S.O. 1990, as amended, Sections 162 and 163 Ontario Regulation 438/97 FINANCIAL IMPLICATIONS: Not applicable. EXECUTIVE SUMMARY: This report provides specific information on each of the Town's reserves and reserve funds, including year end balances. Compared to prior years the current year end balances present a favourable trend of increase rather than decline. The Finance Department will endeavour to continue this direction to improve the overall financial position of the Town. BACKGROUND: ,-. Based on the preliminary 1998 results, we can now report on the pre-audit actual activities within the reserves and reserve funds for 1998. Caution must be exercised in using this information, as the Town Auditors have not yet finished their review due to possible financial implications of Bill 79 (Capping Legislation). The "purpose" and the "recommended maintenance level" for each reserve and reserve fund are set out in Appendices Band C respectively. Report to Council FIN 16-99 June 17, 1999 - Subject: 1998 Pre-Audit Balances of Reserves and Reserve Funds Page 2 ATTACHMENTS: 1. 2. 3. Appendix A Appendix B Appendix C Summary of Reserve & Reserve Funds Description of Reserves Description of Reserve Funds Prepared By: Approved / Endorsed By: ~~ J.. mlinson, Deputy Treasurer ~o/A~ C - , G.A. Paterson, Director of Finance & Treasurer Recommended for the consideration of Pickering Town Council - Thomas J. uinn, Chief Administrative Officer GAP:vw Attachments - ATTACHMENT #I L. TO REPORT #.fUL '4 - n APPENDIX A - SUMMARY TOWN OF PICKERING SUMMARY OF RESERVE AND RESERVE FUND PRE-AUDIT ACTUALS DECEMBER 31,1998 Pre-Audit Actuals Actuals Appendix B Summary of Reserves 1998 1997 1996 1995 4610/4617 Working FundsNacation Pay $ 841,350 $841,350 $ 841,350 $830,000 461 I Replacement of Capital 1,829,610 175,914 1,453,125 613,639 Equipment 4612 Contingencies 786,319 264,319 194,440 30,000 4613/4614 Self Insurance/Inventories 579,123 452,207 458,954 464,206 4618 Rcskilling 0 83,900 83,900 495,000 4619 Rate Stablilization 1.973.817 0 0 0 $6.010.219 $1.817.690 $3.03 1.769 $2.432.845 -- Appendix C Summarv of Reserve Funds 1998 1997 1996 1995 4225 Community Facilities $ 773,483 $ 447,280 $ 1,404,317 $ 2,089,572 4227 Development Charges 5,874,293 6,145,652 5,016,146 2,927,179 4228 Capital Works 613,464 403,758 1,342,783 1,494,642 4230 Parkland 5,778,228 4,161,322 4,690,984 4,326,047 4232 Public Works 1.185,153 1.096,536 1.183.448 1.402.319 14.224.621 $12.254,548 $13.637.678 $12.239.759 Total Reserve and Reserve Funds $20.234.840 $14.072.238 $16.669.447 $14.672.604 - ATTACHMENT#~ TO REPORT#[uLIC--rt APPENDIX B - RESERVE FOR WORKING FUNDS/VACATION PAY G/L 4610/4617 Actual Balance December 31, 1997 1998 Transactions Transfers into the Reserve Working Funds Vacation Pay $841,350 o o Transfers out of the Reserve o Pre-Audit Actual Balance December 31,1998 Working Funds Vacation Pay $400,000 441.350 $~ 1. Purpose of the Reserves: ".... The reserve for workinS?; funds is used to provide operating cash to assist in avoiding short term interest expenses incurred on operations during the first months of the year prior to tax billing. The reserve for vacation pay has been 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. 2. Recommended Maintenance Levels of the Reserves: Reserve for Working Funds - It is recommended as a "rule-of-thumb" that this reserve not exceed 1 % of total revenues. The present balance approximates that amount. Reserve for Vacation Pay - This reserve should be equal to the vacation pay earned, but not taken in any given year. Any difference would be taken into consideration in the next year's budget. - I\TTACHMENT # -4- TO REPORT#EuJJ.'~n APPENDIX B (Page 2) - RESERVE FOR REPLACEMENT OF CAPITAL EQUIPMENT G/L 4611 Actual Balance December 31,1997 1998 Transactions Transfers into the Reserve 1998 Budget General Government Provisions Various Recreation Revenues $ 175,914 $1,663,734 104.962 1.768,696 Sub-total $1,944,610 Transfers out of the Reserve 1998 Cont. to General Fund - Termination Settlements (115.000) Pre-Audit Actual Balance - December 31, 1998 $1.829.610 ,~ 1. Purpose of this Reserve: The purpose of this reserve is to eliminate the need to levy for the full cost of major equipment in the year of acquisition. The reserve acts as a stabilization factor and helps to avoid both mill rate fluctuations and the issuance of long term debt or other means of financing. 2. Recommended Maintenance Levels of this Reserve: This reserve should be kept at a level which is equivalent to the replacement cost of the assets for which they were established. The reserve has fluctuated from the low as at December 31, 1997 of $175,914 to a high of $1.95 million at the end of 1994. An additional provision of $1,141,000 is provided for in the current budget but this account continues to be underfunded. Major additional contributions will be required in future years. - ATTACHMENT#.J.- TO REPORT#.wL/t,-Q1 - APPENDIX B (Page 3) RESERVE FOR CONTINGENCIES GIL 4612 Actual Balancc Dcccmbcr 31, 1997 1998 Transactions Transfcrs into the Reserve 1998 Budget - General Government - Election Provision - Assessment Appeals $264,319 55,000 467.000 522.000 786,319 Sub-total Transfers out of the Reserve o Prc-Audit Actual Balance - December 31,1998 $~ .""""" 1. Purpose of this Reserve: Like the capital equipment replacement reserve, this reserve acts in a tax stabilization capacity. It was established in anticipation of unknown, unusual or extraordinary expenditures which occur from time to time. 2. Recommended Maintenance Levels of this Reserve: Staff continue to monitor the balance of this reserve and the need for long term contributions required.. ,~ ATTACHMENT # -2- TO REPORT #.fli:Ll~-t(I APPENDIX B (Page 4) - RESERVE FOR SELF INSURANCEIINVENTORY G/L 4613/4614 Actual Balance December 31,1997 1998 Transactions Transfers into the Reserve - Inventory Adjustment - Insurance Premiums Under Budget Provisions - 98 Provison $ 452,208 770 51,145 75.000 126.915 Transfers out of the Reserve - Inventory Adjustment Pre-Audit Actual Balance - December 31,1998 $~ (Transfers based on actuals at year end) 1. Purpose of this Reserves: ,,,,... Reserve for self-insurance This reserve was established as a foml of asset protection. Specifically, it is to cover insurance claims resulting from the increase in deductible levels to reduce insurance premiums. Significant savings can be realized through reduced premium costs and staff analyze the costslbenefits of such actions on an annual basis. Reserve for Inventory This reserve has been established to ensure that the cost of revolving inventories IS correctly allocated to the taxpayers of that year and the Council of that period. 2. Recommended Maintenance Levels of this Reserve: Reserve for self insurance This reserve should be maintained at a level to ensure that the funding is adequate to meet actuarial liabilities. This situation is analyzed by staff on a regular basis. Reserve for Inventory The maintenance level required is explained in the Description of the purpose for this reserve. .- ATTACHMENT # :< - TO REPORT # ht1.fI APPENDIX B (Page 5) (.,-q" - RESERVE FOR RES KILLING AND REDEPLOYMENT G/L 4618 Actual Balance Dece,mber 31,1997 1998 Transactions Transfers into the Reserve $83,900 o Transfers out of the Reserve - Transfer to General Fund per 98 Budget (83.900) Pre-Audit Actual Balance - December 31,1998 ~ - 1. Purpose of this Reserve: This reserve was established to set aside funds for seminars, education and redeployment of staff. 2. Rccommcnded Maintcnance Lcvels or this Rescrve: These expenditures are now controlled through each individual operating budget. - ATTACHMENT #~ TO REPORT#.fuL.J~ ~qq - APPENDIX B (Page 6) RESERVE FOR RATE STABILIZATION G/L 4619 Actual Balance December 31,1997 1998 Transactions Transfers into the Reserve - 1998 Provision to Establish Account $ 0 1,973,817 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31,1998 $1.973.817 1. Purpose of this Reserve: - The purpose of this reserve is to act as a mill rate stabilization factor for annual current budget funding. 2. Recommended Maintenance Levels of this Reserve: The level of this reserve will continue to be monitored. - ATTACHMENT # -::z ..-:-. TO REPORT #D.IL/~. (11 APPENDIX C - RESERVE FUND FOR COMMUNITY FACILITIES G/L 4225 Actual Balance December 31,1997 1998 Transactions Transfers into the Reserve Interest Earned Contribution from General Fund $ 447,280 21,194 1,075.758 $1,544,232 Transfers out of the Reserve 1998Capital Budget Funding 2124 - Civie Complex 2132 - Town Property Maintenance 2196 - Information Services 2321 - External Subdivision 2745 - Libraries $(95,495) (12,500) (120,000) (412,802) (129.952) (770,749) Pre-Audit Actual Balance - December 31,1998 $~ l/l.... 1. Purpose of this Reserve: This is a "discretionary" reserve fund established by Council to attempt to avoid both tax rate fluctuations and the need for issuing long term debt for major expenditures required for community facilities. 2. Recommended Maintenance Levels of this Reserve: As can be seen from the summary provided in Appendix A - the balances of this fund have fluctuated from the 1997 year low of $447 thousand to the high in 1994 of $5.1 million. Additional amounts must be allocated to this fund. - ATTACHMENT#~ TO REPORT#M,It", -11 .,- APPENDIX C (Page 2) RESERVE FUND FOR DEVELOPMENT CHARGES GfL 4227 Actual Balance December 31,1997 1998Transactiolls Transfers into the Reserve Interest Earned Net Developer Contributions $6,145,652 345,281 2.868.464 9,359,397 Transfers out of the Reserve Transfer to General Fund Transfer to Capital Fund 2127 - Finance - Growth Studies 2321 -Roads - External Subdivision 2718,- Parks - Acquisition - Development 2745 - Libraries - Materials (1,654,877) $(50,000) (963,204) (71,262) (652,613) (93.148) $( I .830,227) ,-. Pre-Audit Actual Balance - December 31, 1998 $5.874.293 1. Purpose of this Reserve: This is a "obligatory" reserve fund and as such is governed by legislation regulation or agreement and requires revenue received for the special purposes to be segregated from the general revenues of the municipality. Obligatory reserve funds must be created whenever a statute requires revenue received for a special purpose to be segregated from the general revenues of the municipality and the revenue is to be used solely for the purpose prescribed by statute, i.e. in this case the monies charged to developers must be held in trust and used to fund capital services required for new growth. 2. Recommended Maintenance Levels of this Reserve: In accordance with development charge legislation, all development charge revenue must be held within separate reserve funds and can only be used for the financing of growth- related projects. As such, no reserve fund limits are appropriate for development charge reserve funds because they are tied to growth-related capital requirements. - ATTACHMEI'.IT't- 3 . I -'___ TO REPORT#M/,.(!Cj APPENDIX C (Page 3) ".... RESERVE FUND FOR CAPITAL WORKS G/L 4228 Actual Balance December 31,1997 1998Transactions Transfers into the Reserve Interest Earned Developer Contributions (refund) ContTibution from General Fund $403,758 $19,426 $(10,500) $200.780 209,706 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31,1998 $~ ~ 1. Purpose of this Reserve: This Fund is a "discretionary" one and is established pursuant to subsection 163.(2) of the Municipal Act for specified purposes by Council related to the acquisition of assets. 2. Recommended Maintenance Levels of this Reserve Fund: This reserve fund has its lowest balance at the end of 1997 of $404 thousand, with the highest balance in the last 4 years being $1.495 million at the end of 1995. The level of this reserve will continue to be monitored. .- ATTACHMENT li.3 T n RfTORTti[i{l/ It..-(l~ --;.......... APPENDIX C (Page 4) RESERVE FUND FOR PARKLAND G/L 4230 Actual Balance December 31,1997 1998Transactions Transfers into the Reserve Interest Earned Recreational Land (cash-in-lieu) Contribution from General Fund $4,161,322 253,327 735,466 1.074.753 6,224,868 Transfers out of the Reserve Transfer to Capital Fund 2718 -Parks - Purchase Rosebank Property -Fairport & Bonita -Miscellaneous Park Development $(141,567) $(181,740) (123.333) (446.640) Pre-Audit Actual Balance - December 31, 1998 $5.778.228 - 1. Purllose of this Reserve Fund: This is an "obligatory" reserve fund and it has been established pursuant to subsection 163.(2) of the Municipal Act as required by subsections 42.(1), (5), (6), (7), (8) and (9) of the Planning Act This fund is governed by legislation, regulation or agreement and requires revenues received for the special purposes to be segregated from the general revenues of the municipality. Obligatory reserve funds must be created whenever a statute requires revenues for a special purpose to be segregated from the general revenues of the municipality and the revenue is to be used solely for the purpose prescribed by statute. 2. Recommended Maintenance Levels of this Reserve Fund: Due to the obligatory nature of this fund, there are no limits on this fund. - ATTACHMENT #3- TO REPORT#.5.tLJ~-11 ,.. APPENDIX C (Page 5) RESERVE FUND FOR PUBLIC WORKS G/L 4232 Actual Balance December 31,1997 1998Transactions Transfers into the Reserve Interest Earned Developer Contributions $1,096,536 58,954 29,663 Transfers out of the Reserve o Pre-Audit Actual Balance - December 31,1998 $1.185.153 I"""" 1. Purpose of this Reserve Fund: This fund has been established by Council pursuant to subsection 163.(2) of the Municipal Act and is a "discretionary" reserve fund. The purpose of the reserve funds is to acquire fixed assets, e.g. storm sewers, without the need to fund on a long teml nature through the issue of debentures. 2. Recommended Maintenance Levels of this Reserve Fund: The "average" annual balance of this fund over the last four years has been approximately $1.25 million. This reserve should be kept at least at this level in the future. Staff will periodically review the need for this level with the requirements contained in the capital budgets and four year program and report any different findings to Council. -