HomeMy WebLinkAbout2003-08-14 Council Minutes11
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To Gene Kiviaho
From Terry Nash
Date- August 14 2003
Issue
Reserves Policy # 16 1
Council Agenda Item # 7f
Discussion
A financial reserve is an unspent dollar amount that is designated for a future purpose
that extends beyond the current fiscal year This amount includes an Equity in Fixed
Assets component and, also for us, an accumulated surplus component
Municipalities utilize reserves to
1 Hold funds for a Capital Project This allows the municipality to retain a stable
municipal taxation structure without incurring new longer term debt.
2 Hold unspent grant funding until such time as they are withdrawn to complete the
project.
3 Hold proceeds received from a Developer in lieu of land being allocated as a
Public Reserve parcel in a new residential subdivision
4 Hold funds set aside in a restricted Reserve until such time as certain conditions
are met per a legal agreement
5 To provide cash flows and liquidity in the beginning of a Municipality's fiscal
year until such time as the majority of the annual property tax levies are collected In
addition to providing working capital for municipal operations, these reserves are
deployed on an interim basis to pay quarterly school requisitions By retaining a
sufficient amount of funds in reserves, a municipality avoids interim borrowing and
related interest costs that would otherwise be incurred until the majority of its property
taxes have been collected
The enclosed policy establishes reserves and segregates them by their purpose,
establishes a range or an appropriate amount of funds to be held in financial reserves,
and provides for reporting and review of reserve balances
Recommendation
1 Council receive the draft reserve policy replacing policy #16
Terry ash, Assistant CAO
Gen iviaho CAO
Page 61
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DRAFT
FINANCIAL POLICY #16 1
Financial Reserve Policy
Purpose To ensure that surplus and reserve funds are established and managed
in an effective manner
Segregation of Financial Reserves
The following reserves are hereby established
Separate reserves to hold funds that are restricted in their use by
Provincial Legislation or by Legal Agreements
Planning Cash In Lieu Reserve
Funds specifically committed to future programs
Operating Contingiency Reserve
Road Renewal and Replacement Reserve
Future Asset Acquisitions included in Capital Budgets
Capital Reserves by function
Amount of Financial Reserves
The minimum amount in reserves will be sufficient to provide
liquidity and cash flows during the first part of the fiscal year until
the majority of its annual property taxes are collected The
maximum amount to be held in Financial Reserves is the sum of the
funds that are restricted by legislation and agreements, plus those
funds that are committed in the future to financing specific
purposes
(Reserves plus accumulated surplus should not exceed on year's operating
budget Should reserves plus accumulated surplus exceed on year's
budget, Council will review the mill rate and long term expenditures.)
Reserves shall not include any deposits or deferred revenues for
which funds have been received before the corresponding services
have been received before the corresponding services have been
provided
Page 62
DRAFT
Council Approval is required for.
The establishment of and purpose for new reserves
The closure of reserves that are no longer required
The transfers of funds to and from reserves via the annual budget
review process
Long term plans to draw funds from reserves in conjunction with
approving longer term operating and capital plans
Individual reallocations of funds held in reserves that are not
included in Annual Operating or Capital Budgets
Allocations of unspent funds from one fiscal period to the next
period via accumulated surplus
Review of Uncommitted Reserve & Accumulated Surplus
Balances
Council will annually complete a formal review of uncommitted
reserves and accumulated surplus balances and determine how
each year s annual operating surplus will be designated for future
use
Assurance of Reserve Liquidity
At each year-end the municipality shall attempt to retain a total
amount of Cash, Investments and other net liquid assets that is
sufficient to fund its reserve balances This liquidity factor is to be
monitored to ensure that Reserves are supported on an ongoing
basis by real available dollars that can be readily drawn upon
Page 63
Council Agenda #7g
QUARTERLY REPORTS FAXED Page 64 - 80
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