Under the authority of Council, reserves and reserve funds are appropriations from the town’s net revenues designated for purposes that may extend beyond the current fiscal year. They are an integral part of the municipal budget planning process and long term financing plan that contributes to the municipality’s sound financial position. The primary purposes are;
This procedure provides guiding principles for the establishment, continuance and use of reserves and reserve funds and summarizes the town’s legal authority and standards of care in relation to those financial provisions.
Reserves are set up for specific purposes. They are used to offset impacts and stabilize the operating and capital budgets. They typically cushion the impact of major expenditures on the tax rate in any one-year period.
Reserve Funds are typically established through a by-law of council, or by a requirement of federal or provincial legislation i.e. Development Charges Act, for a specific purpose and segregated from general revenues of a municipality to meet the financial requirements of a future event. Reserve Funds are further sub-divided into discretionary and obligatory reserve funds.
Reserves and reserve funds are governed by the provisions and requirements of the Municipal Act, 2001 and its regulations; Public Sector Accounting Board (PSAB) and Generally Accepted Accounting Principles (GAAP).
All reserves and reserve funds shall be established, maintained and used for a specified purpose authorized by town policy, this procedure, statute or by-law.
They are established and utilized by the town to assist the municipality maintain its strong financial position by;
Town reserves and reserve funds shall be supported by Council approved procedures, guidelines and where required by-laws that support financial planning of the fund by;
The overall balances of self-supporting reserves to debt will be maintained at a ratio not to exceed 1:1.
Reserves and discretionary reserve funds
Obligatory Reserve Funds
Approval of funding to and from the reserves and reserve funds will be in accordance with the town’s established Financial Control and Annual Budget policies and procedures or by Council resolution.
Internal borrowing to cover interim servicing requirements or internal financing is permissible, subject to any legislative restrictions, Council authorization, and the following requirements:
If the purpose for which the reserve or reserve fund was created has been accomplished, the treasurer, in consultation with program area staff and, subject to any legislative restrictions, shall report at year-end with recommendations on:
Reserves and reserve funds shall be reviewed annually to ensure they are still meeting the needs of the town. The review also encompasses an evaluation of the alignment of the town’s existing reserves and reserve funds to current strategic goals and evolving program pressures, looking at opportunities to consolidate similar funds to improve financial flexibility. The results of the review shall be reported in the yearend financial progress report to Council and shall include recommendations, subject to legislative restrictions on;
Capital reserves: are utilized to assist in the financing of community enhancements, supplement capital levy funding for infrastructure renewal and provide for unknown capital contingencies
Chief Administrative Officer (C.A.O.): means the Chief Administrative Officer of the Town of Oakville.
Council: means the Council of the Town of Oakville.
Deferred revenue, obligatory reserve funds: are development charge contributions, payments in lieu of parkland and gas tax, levied or received under the authority of federal and provincial legislation and town by-laws. These amounts have been collected but the related services have yet to be performed. These amounts will be recognized as revenue in the fiscal year the services are performed.
Discretionary reserve funds: means Reserve Funds created at the discretion of Council pursuant to the Municipal Act.
Equipment reserves: used to fund the various vehicle and equipment replacement across the town. Contributions from the operating budget into these reserves are managed in order to ensure future replacements are sustainable.
GAAP: generally accepted accounting principles.
Gas Tax reserves: is used to support various initiatives across the town. Provincial gas tax is dedicated to Transit and has been used primarily to support service expansion as the town grows. Federal Gas Tax funds are allocated to projects that meet the guidelines per the Federal Gas Tax Agreement.
Obligatory reserve funds: means Reserve Funds that are required by legislation which stipulates that certain revenue received for special purposes be segregated from the general reserves of the Town.
Program: means a service area of the Town.
PSAB: Public Sector Accounting Board.
Reserve: an appropriation of net revenues set aside at the discretion of council to assist the maintenance of its financial position. It does not require the segregation of assets, and may be established for any municipal purpose. Reserves typically do not earn interest unless specified by council.
Reserve fund: established through a by-law of council, or by a requirement of provincial or federal legislation for a specific purpose and segregated from the general revenues of a municipality to meet the financial requirements of a future event. Reserve Funds may be discretionary (funds authorized by council) or obligatory (legislated funds that may only be used for their prescribed purpose). Reserve Funds typically earn interest.
Stabilization reserves: to offset extraordinary and unforeseen expenditure requirements, revenue shortfalls and the management of cash flows. This includes reserves to address volatility such as storm events, tax stabilization, fluctuations in planning and development services, litigation and insurance costs.
Town: means the Corporation of the Town of Oakville.
Treasurer: means the Commissioner, Corporate Services and Treasurer of the Town of Oakville.
The deputy treasurer and director Financial Planning or their designate shall be responsible to:
Procedure Number: F-FPC-004-001
Parent Policy: F-FPC-004
Section: Financial Planning
Sub-Section: Financial Planning Controls
Author: Financial Planning department
Effective Date: 2016 Nov 14
Review by Date: 2021
Appendix A – Reserves/Reserve Funds
Appendix B – Reserve interest allocation
The Municipal Act provides municipalities with broad powers to manage financial matters, which includes power to establish reserves and reserve funds for services under their jurisdiction where they have the authority to spend money (s. 10 and s. 11).
Development Charges Act
Building Code Act
Federal/Provincial Transfer Payments