Financial Control Procedure

Purpose statement 

​​The purpose of this procedure is: 

• ​To ensure that adopted budgets, approved staff complement, and service levels are implemented as intended by Council; 
• ​To recognize that Department Heads, Commissioners, Treasurer, and Chief Administrative Officer (CAO) are accountable to Council for their spending, revenue generation, and service delivery performance as intended by the adopted budgets; 
• ​To outline the procedure related to financial management of operating and capital budgets, reserve and reserve fund entries, and complement control;  
• ​To ensure that Council is informed of the status of budget variances, any factors or risks that may impact the budget, and capital project closures; 
• ​To outline the principles governing funding decisions outside of the annual budget process; 
• ​To define the roles and responsibilities related to the financial control procedure. ​ 

Scope 

This procedure applies to all Town staff except for the Office of the Mayor and Council.
 

Procedure 

​​Guiding Principles 

1. ​Accountability – to ensure that staff monitor and manage budgets accordingly as programs, services, and projects are delivered and completed within Council approved levels of service and scope. 
2. ​Financial flexibility – to assist in the event of unusual or unplanned budget variances to ensure the continuation of the delivery of programs, services, and projects. 
3. ​Transparency – to ensure that Council is informed on a timely basis on financial matters and any risks associated with the adopted budgets. 
4. ​Responsibility – The Mayor and Council together have authority for proposing, adopting, and amending the budget in accordance with Ontario Regulation 530/22 subsections 7 – 9.  

​Interim Spending Authority 

1. ​Prior to the budget being adopted, spending will be limited as set out in this procedure. 
2. ​Departments will not incur any exceptional or new operating expenditure of a type, kind, or extent that materially alters the level of service provided in the previous year’s budget until such changes are approved in the Council adopted budget. 
3. ​Until the operating budget is adopted by Council, Department Heads are authorized to make spending commitments to a cumulative total that does not exceed 50% of the previous year’s adopted operating budget for a program. 
4. ​Until the capital budget is adopted by Council, Department Heads are authorized to make spending commitments for projects classified as Infrastructure Renewal in the Mayor’s proposed capital budget to maintain assets in a state of good repair as guided by the Asset Management Plan. If the Mayor’s proposed capital budget is not available, authority will be based on the draft capital budget prepared by staff.   
5. ​The Treasurer will seek the necessary Council approvals to undertake interim borrowing as set out under the Municipal Act. 

​Operating Budget Authority 

1. ​The operating budget adopted by Council establishes the spending authority for a program to provide services at the Council approved levels of service. 
2. ​Department Heads and Commissioners do not have authority to exceed the net tax levy of any program as provided in the Council adopted budget.  For added clarity: 
   • ​Department Heads may authorize additional expenditures that exceed the budget in individual program accounts for unusual or unplanned costs provided that these are mitigated with corresponding savings in other accounts, additional revenue generated from related expenditures, or other appropriate funding sources as identified by the Treasurer. 
   • ​Additional revenue received beyond the level in the adopted budget will not be spent or committed without Council approval unless the additional revenue is received to be spent for a specific purpose. 
3. ​If Department Heads and Commissioners expect to exceed the net tax levy of a program, the Treasurer and CAO must be notified prior to incurring the overage. The Treasurer and CAO may authorize the overage provided that it can be offset with savings in other programs, other appropriate funding sources, or with transfers from respective reserves or reserves funds as deemed appropriate by the Treasurer. If overages cannot be offset, Council approval is required prior to incurring such overages. 
4. ​Savings on personnel budgets cannot be used to make additional spending commitments on non-personnel expenditures except when required to provide services at the Council approved level of service.  

​Capital Budget Authority 

1. ​The capital budget adopted by Council establishes the scope, budget, and funding for each capital project.  
2. ​Staff do not have the authority to amend the scope of a project without Council approval.
3. ​Department Heads, in consultation with Asset Management and Finance, are authorized to amend the asset details of a capital project, when necessary, based on updated asset management information.  
4. ​The following over-expenditure allowances and authority are permitted in a capital project to be funded from appropriate reserves, reserve funds or other sources excluding other capital projects.  Project Managers should accurately estimate any potential over-expenditure in a capital project and obtain approval before incurring the expenditure. ​

Over-expenditures that require Commissioner, Treasurer, and CAO approval will be reported to Council in the quarterly financial progress reports.

• Over-expenditure amounts: Lesser of 20 per cent of budget or $50,000 if budget is less than/equal to $500,000, authority is Department Head
• Over-expenditure amounts: Lesser of 10 per cent of budget or $250,000 if budget is greater than $500,000, authority is Department Head
• Over-expenditure amounts: Up to $500,000, authority is Commissioner, Treasurer and CAO
• Over-expenditure amounts: Over $500,000, authority is Council

5. ​In emergency situations, the CAO is authorized to amend the capital budget to add a new capital project, with a funding source recommended by the Treasurer, to make spending commitments for an amount not exceeding $500,000.  Such emergency situations will be reported to Council in the quarterly financial progress reports.   
6. ​Departments Heads may authorize project consolidations and splits which involve reallocating the original funding and scope of work between Council approved projects to facilitate effective management of the projects with no change to the original scope of work or funding requirements. Project consolidations and splits will be reported to Council in the quarterly financial progress reports.    
7. ​The Treasurer may change the original funding source(s) of any capital project to ensure that reserves and reserve funds are used appropriately in accordance with the Reserve/Reserve Fund procedure, and that unanticipated grants or recoveries are fully utilized. Any project refinancing will be reported to Council in the quarterly financial progress reports.   
8. ​If any unbudgeted funding (ex. grants or recoveries from third parties) is received for a capital project, the over-expenditure allowances indicated in d) will still apply. 
9. ​The Treasurer, in consultation with Departments Heads, may authorize that savings from capital projects be transferred to the relevant reserves, reserve funds or other appropriate sources to ensure that financial resources are not tied up in capital projects that do not require the funding. Such transfers will be reported to Council in the quarterly financial progress reports. 
10. ​For property acquisitions (ex. land and facilities) approved by Council, staff are authorized to add a capital project for costs related of the acquisition with a nominal budget of $1 unless directed otherwise. The acquisition is to be funded in accordance with Council direction. 
11. ​Council approval is required to cancel, defer, or close a project without completing its intended scope.  

​Capital Project Closure 

1. ​Project Managers will review and notify Finance to close completed projects in a timely manner to ensure that financial resources are not tied up in capital projects that are no longer required. 
2. ​If a capital project has no expenditures for a period of 12 months, the Department Head must provide reasonable justification to Finance and the relevant Commissioner to continue to keep the project open otherwise it will be recommended for closure. 
3. ​Except where a capital project has been financed through the issuance of debentures, unspent funds in a capital project that is completed will be returned to the originating reserve/reserve fund upon closure. Unspent funds from capital projects funded by the capital levy will be returned to the general capital reserve. 
4. ​In the event that a transaction is necessary after the closure of a capital project, the Treasurer has the authority to reopen the project to process the transaction. 

Debt Financing  

​The approval to fund an eligible capital project by debenture will generally be sought through the annual capital budget process. Favorable variances on completed capital projects that were debenture financed will be transferred to the general capital reserve, or self-supported reserve fund if applicable.  

​Reserve, Reserve Fund and Other Entries 

​The following entries will generally occur at year-end but may also occur in-year as necessary, subject to maximum target levels in the Reserve/Reserve Fund procedure: 

1. ​Building Services, Cemeteries, Harbours, Parking, Election, and Stormwater Management: with Council approval, favourable/unfavourable variances will be balanced with transfers to/from their own specific reserves or reserve funds. 
2. ​Fuel: with Council approval, unfavourable variances due to actual rates being higher than budgeted rates can be offset with a transfer from the Tax Stabilization reserve. 
3. ​WSIB and Post-Employment Benefits: with Council approval, favourable/unfavourable variances will be balanced with transfers to/from their own specific reserve funds. 
4. ​Winter control: with Council approval, favourable/unfavourable variances can be balanced with the Storm Event reserve. 
5. ​Oakville Public Library: with Council approval, favourable/unfavourable variances will be balanced with the Tax Stabilization reserve. 
6. ​Unused funds in active road resurfacing capital projects will be reallocated between these projects to facilitate effective management of such projects.  
7. ​Corporate Debt expenses: favourable variances for corporate (tax-supported) annual debt expenses will be transferred to the general capital reserve to be applied to reduce the overall corporate need to debenture finance in future years. 
8. ​Securities: unclaimed and forfeited securities will be transferred to the general capital reserve in accordance with the Development Securities Procedure. 
9. ​Sale of Properties: proceeds from the sale of properties will be transferred to the general capital reserve, or the original funding source of the acquisition if applicable. 
10. ​Any difference between actual assessment growth and budgeted assessment growth will be balanced with the Tax Stabilization reserve in order to keep the tax levy increase at the level in the Council adopted budget. 

Variance Reporting and Risk Identification 

​Council will be informed on a timely basis on financial matters and will receive, as a minimum, quarterly financial progress reports for the periods ending March, June, September and December which will include updates on the following matters: 

1. ​Variances between adopted budgets and actuals by program. 
2. ​Project closures including rationale from the Department Head for any project with:
   1. unfavourable variance that requires authority beyond the Department Head; 
   2. ​favourable variance greater than 20% of the budget and minimum of $100,000. 
3. ​Projected reserve/reserve fund balances, fund transfers for project closures, and any material variances to planned contributions or expenditures. 
4. ​Projected outstanding debt principal and projected new debt to be issued in the year. 

​Complement Control 

1. ​The Director of Human Resources, in consultation with the Treasurer, will be responsible for monitoring the approved staff complement. 
2. ​Continuous full-time staff complement cannot exceed the level approved by Council in the adopted budget. 
3. ​Department Heads are responsible for managing their seasonal and part-time hours within the adopted budget. 
4. ​Position conversions from seasonal or part-time to full-time and vice-versa require Council approval. 

Definitions 

​​“Account” means the level of detail at which expenditures/revenues are recorded in the town’s general ledger. 

​“Budget” means a financial operating or capital plan adopted by Council for a given year for the projected revenues and expenses. 

​“Capital Budget” means the annual Council adopted plan that identifies gross expenditures and financing for each capital project. 

​“Capital Project” means an undertaking in respect of which expenditures are typically incurred to acquire, improve, or install land, buildings, engineering structures, machinery or equipment including the installation of computer software or for other specific studies or purposes directed by Council. 

​“Commitment” means a contractual obligation usually involving a purchasing document or legal agreement for the purchase of goods, services or construction, including the execution of any document evidencing the obligation. 

​“Council” means the Mayor and members of Council for the Town of Oakville. 

​“Department Head” means the head of any Town department (i.e. Directors). 

​"Emergency" means an unforeseen situation of an urgent nature, presenting an unacceptable risk to the health and safety of persons or to property, requiring an immediate expenditure of funds. 

​“Operating Budget” means the annual Council adopted plan for expenditures, revenues, staffing levels and service levels for operations taking place from January 1 to December 31 in a given year. 

​“Program” means any organizational unit that may encompass one or more related municipal services. 

​“Project Manager” means the individual(s) responsible for the planning and execution of a capital project.  

​“Self-supported” means a program that generally does not require tax levy funding as the revenues and respective reserves offset the expenses.  Examples of such town programs are Building Services, Cemeteries, Harbours, Parking, and Stormwater Management. 

​"Treasurer" means the employee designated as such by Council for the position. The Treasurer will exercise all powers and duties of the Treasurer as set out in the Municipal Act.​ 

Responsibilities

Staff accountable for budgets 

1. ​Fully understand and comply with this policy and procedure; 
2. ​Regularly monitor and verify operating and capital budgets to ensure that programs, services and projects are delivered and completed within the available budgets and assigned spending limits; 
3. ​Exercise integrity and good business judgment when using the assigned financial spending authority; 
4. ​Ensure appropriate budgets (operating or capital) and accounts are used to track expenditures and revenues; 
5. ​Provide direction to Finance to close capital projects in a timely manner to ensure that financial resources are not tied up in capital projects that are no longer required. 

​Finance 

1. ​Administer this policy and procedure and provide a reasonable level of compliance oversight; 
2. ​Provide advice and direction on interpretation and application of this policy and procedure; 
3. ​Administer and coordinate the financial reporting process by providing departments monthly and ad-hoc financial reports, as necessary, to assist staff to monitor and manage their budgets; 
4. ​Report to Council on a quarterly basis, as a minimum, the financial status of matters as described in the Variance Reporting and Risk Identification section of the procedure. 

​Department Heads/Commissioners 

1. ​Ensure staff who manage budgets are in compliance with this policy and procedure and take appropriate corrective actions when required; 
2. ​Accountable to the CAO and Council for the decisions exercised by staff to which they have granted the financial spending authority;   
3. ​Responsible for updating or revoking financial spending authority for any status changes for staff, including change in departments, authority levels, or employment status with the town. 

​CAO 

1. ​Administer any authority granted in accordance with this policy and procedure; 
2. ​Accountable to Council for the decisions exercised by the staff to which they have granted the financial spending authority.​