Appendix - 2016 Budget Summary

Appendix 1.1 - Explanation of Object of Expenditure

Additional compensation Compensation beyond regular hours worked which is in addition to the standard pay. Includes both hourly and lump sum items.
Administrative Costs that are not directly related to operating a specific program or line of business but are required to carry out business/maintain operations
Advertising and promotion Expenses incurred to place advertisements, promote awareness of the Region and its programs, as well as other function related expenses
Amortization equipment, vehicles and technology Amortization costs of equipment, vehicles, and technology
Amortization - occupancy and infrastructure Amortization costs of buildings and infrastructure
Benefits and WSIB The cost of regulated and additional benefits associated with compensation
Childcare Cost of providing assistance to individuals to provide relief for the cost of childcare
Community assistance Cost of providing assistance to individuals directly, or through an Agency. Assistance is dependent upon a calculation or criteria requirement.
Compensation Represents the cost of labour for the Region
Equipment repair and maintenance Costs incurred to repair and maintain equipment
Equipment, vehicles and technology Costs related to the operation, repair, maintenance of equipment, vehicles and technology and minor purchases
External support services Cost of hiring external companies / personnel for labour
Fees and charges expense Service fee, service charge or surcharges incurred. The purpose of the fee / charge often depends on the nature of the product and corresponding service provided. The fee may be a flat fee or a variable one.
General administrative costs Other costs associated with administering regional programs such as memberships, rentals, and licences
Office, printing and postage Used to record general office, printing and postage expenses
Operational and supply Costs directly related to operating a specific program or line of business that the Region runs
Other benefits Other costs paid to individuals or agencies to provide social assistance
Other compensation expense Costs of payouts, accruals, and other miscellaneous compensation expenses
Partnerships and donations Non-advertising costs to provide funding to a company or organization for marketing / branding or economic incentives as well as donations
Partnerships, donations, rebates and exemptions Cost of providing assistance to an Organization, Local Area Municipality, or business for marketing / branding and economic incentives to drive Regional and / or Council priorities
Program specific purchased services Purchase of services used directly in the operation of a program or line of business
Program specific supplies and materials Purchase of consumable materials and supplies used directly in the operation of a program or line of business
Property and infrastructure maintenance Cost of repairing and maintaining buildings (internal and external) and infrastructure
Property taxes and rent Costs paid to rent or lease a building / property and costs paid for property taxes
Purchases for resale / distribution Purchases made with the intent to sell or distribute to a third party (non-inventoried) such as blue bins
Rebates and exemptions Rebates and exemptions provided by the Region for economic incentives and to drive Regional and/or Council priorities
Salaries and wages The cost of internal labour for regular operations and hours worked
Staff development Encompasses costs of registering, attending, and associated materials for all types of facilitated learning opportunities including formal coursework, conferences, seminars and training.
Telephone and communications All operating expenses related to telephone, internet, communications, and data lines. Includes usage costs, as well as maintenance related expenses
Travel and meals Travel and meal expenses incurred for purposes other than staff development. For example, travel between various Region locations, or meals incurred for meetings.
Utilities Cost of utilities associated with occupancy
Vehicle operating costs Costs incurred to operating vehicles such as fuel
Vehicle repair and maintenance Costs incurred to repair and maintain vehicles
Water and wastewater repair and maintenance Cost of repairing and maintaining our Water and Wastewater infrastructure

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Appendix 1.2 - Financial Policies and Guidelines

Niagara Region follows the following financial policies and guidelines:

Accounts Receivable: All monies owing to Niagara Region will be collected as they become due and deposited as soon as is practical.

Affordability Guidance: Niagara Region will follow the methodology as outlined in this policy to establish budget guidance to support Council's Business Plan.

Investment Policy: The purpose of this policy is to establish procedures and practices designed to maximize the use of funds held in Niagara Region accounts through a program of term investments.

Capital Asset Management: This policy outlines standards and guidelines for the processes of Capital Asset Management. Capital Asset Management can be defined as the activities related to program planning, financing and administration of resources for the acquisition, development or construction of tangible capital assets of the Region. It also includes the integration of operating and capital budgets by identifying future financial resources to be allocated from operating funds to operate and maintain these tangible capital assets. This policy also outlines standards and guidelines for identifying, measuring and recognizing expenditures as tangible capital assets in order to facilitate appropriate financial presentation and disclosure.

Cost Allocation: This policy outlines principles and guidelines for the processes of cost allocation. Cost allocation can be defined as attributing a cost pool to several cost objects (e.g. job, department, cost centre, program or beneficial recipient) using a driver that best measures a causal or beneficial relationship between the cost pool and the cost object.

Developer's Deposits: In order to ensure that the Corporation has adequate security for the completion of certain works, deposits in the form of cash or letters of credit may be requested by the Corporation.

Donations - Charitable C3-D05 Tax Rebates for Charitable Organizations By-law: Due to the current trend of funding cutbacks and no tax increases, the Region is not always able to provide sufficient funds for worthwhile projects. The Region will become more reliant on donations from individuals, groups, organizations and businesses to carry out projects that would otherwise be deferred until funding becomes available. The Region is able to accept donations and provide "official tax receipt for income tax purposes" as prescribed by Canada Revenue Agency, therefore it is necessary to establish a procedure for handling donations.

Expenses - Reimbursement of: It is corporate policy to reimburse employees of the region for expenses incurred while engaged on authorized Regional business. The Region values continuous learning and self-improvement and strives to promote a culture supportive of these goals. Such expenses must be reasonable in the circumstances and must be reflective of the Regional Ethics Policy.

Financing Lease Policies and Goals: Regional Council has the authority under subsection 210.1 of the Municipal Act to enter into an agreement for the provision of municipal capital facilities. Agreements under this section may include financing leases. As Regional Council recognizes that there are inherent risks associated with financing leases, compliance with this policy will ensure that the necessary due diligence is undertaken by staff in the review of all financing lease agreements and that Regional Council is provided full disclosure on the impacts of these leases prior to entering into any agreement for the provision of municipal capital facilities.

Petty Cash: To establish a procedure for all Regional Petty Cash funds including Senior Citizens Trust Petty Cash funds.

Property Valuation Studies - Participation With Area Municipalities: The Regional Municipality of Niagara wishes to partner with Area Municipalities in the conduct of Property Valuation Studies, where a successful defence of a Property Assessment Appeal will result in additional tax benefit to the Region.

Purchasing Card Purchasing By-law: To comply with the purchasing by-law and ensure the most cost-effective methods are used to purchase goods and services for all Regional operations and for the disposition of goods according to Regional needs.

Release of Trust Funds of Deceased Residents: To ensure that Regional staff are aware of the documents and information required prior to the release of funds held in trust for a deceased resident of one of the Homes for the Aged operated by the Region. These requirements differ depending on whether the deceased left a Will or not.

Securities, Care and Custody of: When Regional Council has approved a form of security pursuant to an agreement with a third party such security will be governed by the procedures outlined herein to ensure:

  • Forms of security are in the proper format and content is acceptable
  • Physical security of all forms of security
  • Forms of security are kept current

Surplus-Deficit Policy: Niagara Region will address/allocate annual surplus/deficits within the guidelines established in this policy (focusing on allocating surplus to areas that have been identified at risk of being underfunded).

Tax Rebates for Charitable Organizations: The purpose of this policy is to provide tax rebates:

  • To eligible charities occupying commercial or industrial property that were previously exempt from paying the Business Occupancy Tax (BOT)
  • To organizations occupying residential property as defined under section 325 (1) of the Municipal Act, 2001
  • To organizations as defined under section 6 of the Assessment Act

This policy recognizes that the Fair Municipal Finance Act, 1997 may have impacts on the amount of property taxes such organizations are required to pay, either directly or indirectly, and provides relief in the form of tax rebates subject to certain conditions as set out in the policy.

Variance Analysis and Forecasting: Due to successive years of expenditure restraint it has been necessary for all departments to perform more comprehensive year-to-date variance analysis and forecasting of expected year end operating results. Variance analysis and forecasting measures ensure that significant departures from plans are detected early enough to take corrective action to avoid a deficit by year end. This policy summarizes desirable practices, many of which are already in effect, in order to provide guidance for variance analysis and forecasting and to clarify reporting procedures.

Operating Budget Adjustment Policy: This policy outlines standards and guidelines for the processes of Operating Budget Adjustments. The operating budget can be defined as activities related to the current year activities of programs and services. This also includes any changes associated with the Full Time Equivalents.

Reserve and Reserve Funds Policy: The purpose of this policy is to formalize guidelines in order to effectively manage Niagara Region reserve and reserve funds, ensuring adequate reserves are held for both planned and unexpected future expenditures, which will promote affordability and sustainability.

Prepaid Expenditure: The purpose of this policy is to establish criteria and procedures on reflecting costs as prepaid expenditures and when to bring costs into current expense.

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Appendix 1.3 - Basis of Budgeting, Accounting and Fund Structure

Basis of Accounting and Financial Reporting

Financial information and financial statements are prepared and presented in accordance with generally accepted accounting principles for local governments as recommended by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.

Niagara Region follows the accrual basis of accounting. This accrual method recognizes revenues as they are earned and expenditures as they are incurred. At year end if required revenues and expenses that have not yet been processed are recognized and then reversed in the following year when the transaction is processed.

Effective Jan 1, 2008 Niagara Region began reporting tangible capital assets on the annual financial statements as required by Public Sector Accounting Board 3150, Tangible Capital Assets. The "Fund Based" or cash budget prepared by Niagara Region is converted to full accrual basis accounting for the purpose of financial reporting, in the following way:

  • The Capital Fund is reported through the Tangible Capital Asset accounts in the Consolidated Statement of Financial Position
  • The Reserves or Reserve Fund is reflected in the Consolidated Statement of Financial Position as "Accumulated Surplus"
  • The Operating Fund is reflected in the Consolidated Statement of Operations which is adjusted to reflect interest on debt only, the amortization expense, gain or loss on disposal of tangible capital assets, post-employment benefits and solid waste landfill closure and post closure expenses
  • Capital budgets should result in tangible capital assets - capital asset management policy defines tangible capital assets in section 7 of the policy

Fund Structure and Basis of Budgeting

Niagara Region uses Fund Accounting for budgeting purposes. Each established entity is self-balancing. The Regional budget is composed of two primary funding sources - tax levy supported services and rate supported services. Each of these includes an operating fund, capital fund and reserves and reserve funds. Tax supported services are levied on the assessed value of property. Rate supported services include water, wastewater and waste management, which are billed separately to the local area municipalities.

Municipal Act Balanced Budget Requirements

The Municipal Act 2001, section 289 requires that the Region prepare and adopt a balanced budget each year. The Municipal Act, O. Reg. 284/09 also requires municipalities to budget for amortization expense, post-employment benefits and solid waste landfill closure and post closure expenses or, if the municipality does not budget for these items, to report to Council advising of these exclusions.

To comply with this regulation the Niagara Region reports on how these expenses are to be funded before Council adopts the budget. However, Niagara Region does not budget for these items. The operating and capital budgets are approved each year by Regional Council for the period of January 1 to December 31.

Operating Fund

Activities are budgeted annually for each program based on the estimated operating costs. The operating budget includes annual expenditures for personnel costs, administrative expenses, materials, supplies and utilities, purchased services, Social Assistance and Housing Provider, financial expenditures, minor capital equipment and renovations, debt charges, reserve transfers, subsidy revenue for Ontario and Canada grants and program fees and service charges.

There are many considerations in developing budgets. Included are compensation agreements, inflation, mandated service requirements, Council Business Plan, Council Guidance, and customer needs. At the end of any given budget year as part of the year-end process, any net surplus or deficit is transferred to or from reserves and / or reserve funds in accordance with the Council approved Surplus / Deficit policy, ensuring a closing balance of $0 in the operating fund.

Niagara Region budgets by program, which reflects expenditures and revenues based on program delivery and responsibility. Niagara applies best practices in budgeting by allocating corporate support costs. This new methodology introduced in the 2013 budget divides support costs into categories and then allocates the cost to program / services based on program usage. The new model fully allocates all identified supports cost to programs and services.

Capital Fund

Capital projects are generally budgeted in one year, however they can be budgeted in multiple years if each element is considered an independent discreet project such as design and construction.

Niagara Region's capital budget includes expenditures and financing sources to acquire and / or construct tangible capital assets such as regional facilities, roads, bridges, EMS stations, long-term care facilities, water and wastewater treatment plants, waste management facilities and the purchase of fleet related equipment. The capital budget is established on a project by project basis, where the budget includes the full cost of the project regardless if costs are incurred in more than one fiscal year.

The corresponding expenditures may materialize over several years as the project is completed. Upon completion, each project is closed and any surplus or deficit is transferred to a Capital Variance Project to be used in the event of contingency expenditures due to a project going over budget. During the year the balance within the capital variance project is monitored and a recommendation is made to Council to move funds back to the appropriate reserve or reserve fund to be used as funding sources for future Capital Projects in accordance with the Council approved Capital Asset Management Policy.

Reserves and Reserve Funds

The use of reserves is an integral part of the budget planning process and is an important financial tool in developing short and long-term fiscal policies. Prudent use of reserves help mitigate fluctuations in taxation and rate requirements and assist in funding capital projects.

The Region recently approved a policy on Reserves and Reserve Funds. Included in the policy is the categorization of reserves for specific purposes:

  • Commitment
  • Future liability
  • Specified donation
  • Corporate stabilization
  • Department specific and rate program

Reserve funds have been categorized as either discretionary reserve fund or obligatory reserve fund.

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