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HomeMy WebLinkAboutAFC 2016-03-14 Agenda.pdfCityCityCityCity of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge Audit & Finance CommitteeAudit & Finance CommitteeAudit & Finance CommitteeAudit & Finance Committee March 14March 14March 14March 14, 2016, 2016, 2016, 2016 9999:00 A:00 A:00 A:00 AMMMM Blaney RoomBlaney RoomBlaney RoomBlaney Room Chairperson:Chairperson:Chairperson:Chairperson: Councillor Masse Committee Members:Committee Members:Committee Members:Committee Members: Mayor Read; Councillors C. Bell; K. Duncan; G. Robson; T. Shymkiw; C. Speirs Staff:Staff:Staff:Staff: Chief Administrative Officer: T. Swabey GM – Corporate & Financial Svc: P. Gill GM – Public Works & Development F. Quinn GM – Community Dev. Park & Rec K. Swift Manager of Accounting: C. Nolan Manager of Financial Planning T. Thompson Manager Sustainability & Corporate Planning L. Benson Recording Secretary:Recording Secretary:Recording Secretary:Recording Secretary: Amanda Gaunt AGENDAAGENDAAGENDAAGENDA 1.1.1.1. Approval ofApproval ofApproval ofApproval of aaaagendagendagendagenda 2.2.2.2. Approval of Approval of Approval of Approval of mmmminutes of inutes of inutes of inutes of January 25, 2016January 25, 2016January 25, 2016January 25, 2016 3.3.3.3. Preliminary Year End Update (General Preliminary Year End Update (General Preliminary Year End Update (General Preliminary Year End Update (General Revenue)Revenue)Revenue)Revenue) 4.4.4.4. Investment updateInvestment updateInvestment updateInvestment update 5.5.5.5. Next MeetingNext MeetingNext MeetingNext Meetingssss • April 18 – Consolidated Financial Statements • May 2 – Review of 2015 audit results “Original signed by C. Nolan”________ Agenda submitted by: C. Nolan, CPA, CGA Manager of Accounting CityCityCityCity of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge Audit & Finance CommitteeAudit & Finance CommitteeAudit & Finance CommitteeAudit & Finance Committee Meeting MinutesMeeting MinutesMeeting MinutesMeeting Minutes January 25, 2016 The Minutes of the Audit and Finance Committee Meeting held in the Blaney Room of the Municipal Hall, 11995 Haney Place, Maple Ridge, BC on Monday, January 25, 2016 at 9:00 a.m. PRESENTPRESENTPRESENTPRESENT Committee MembersCommittee MembersCommittee MembersCommittee Members Municipal StaffMunicipal StaffMunicipal StaffMunicipal Staff Councillor Masse, Chair T. Swabey, Chief Administrative Officer Mayor Read P. Gill, General Manager Corporate & Financial Services Councillor Bell C. Nolan, Manager of Accounting Councillor Shymkiw T. Thompson, Manager of Financial Planning Councillor Duncan L. Benson, Manager of Sustainability and Corporate Planning Councillor Speirs A. Gaunt, Confidential Secretary absentabsentabsentabsent GuestGuestGuestGuest Councillor Robson B. Cox, BDO (External Auditor) The meeting was called to order at 9:00 a.m. 1. Approval of agendaApproval of agendaApproval of agendaApproval of agenda AddAddAddAddition to agenda:ition to agenda:ition to agenda:ition to agenda: • Nomination of ChairNomination of ChairNomination of ChairNomination of Chair • Discussion of minutes from November 3Discussion of minutes from November 3Discussion of minutes from November 3Discussion of minutes from November 30, 20150, 20150, 20150, 2015 MOVEDMOVEDMOVEDMOVED by Councillor Bell and SECONDEDSECONDEDSECONDEDSECONDED by Mayor Read that the agenda be approved as submitted. CARRIEDCARRIEDCARRIEDCARRIED 2. Nomination of chairNomination of chairNomination of chairNomination of chair MOVED MOVED MOVED MOVED by Councillor Bell and SECONDED SECONDED SECONDED SECONDED by Councillor Shymkiw that Councillor Masse continue as chair of the Audit & Finance Committee. CARRIEDCARRIEDCARRIEDCARRIED 3. Discussion of minutes from November 30, 2015Discussion of minutes from November 30, 2015Discussion of minutes from November 30, 2015Discussion of minutes from November 30, 2015 The committee discussed the minutes and the broader discussion from the November 30th meeting. Audit & Finance Committee Meeting Minutes January 25, 2016 Page 2 4. Approval of minutes of Approval of minutes of Approval of minutes of Approval of minutes of November 30, November 30, November 30, November 30, 2015201520152015 MOVEDMOVEDMOVEDMOVED by Councillor Speirs and SECONDEDSECONDEDSECONDEDSECONDED by Councillor Shymkiw that the minutes of November 30, 2015 be approved. CARRIEDCARRIEDCARRIEDCARRIED 5. Adopt Terms of Reference as amendedAdopt Terms of Reference as amendedAdopt Terms of Reference as amendedAdopt Terms of Reference as amended MOVEDMOVEDMOVEDMOVED by Mayor Read and SECONDEDSECONDEDSECONDEDSECONDED by Councillor Speirs that the amended Terms of Reference be adopted. CARRIEDCARRIEDCARRIEDCARRIED 6. 2015 Audit Update2015 Audit Update2015 Audit Update2015 Audit Update Overview of 2015 audit by external auditor The auditor reviewed the planning letter dated January 13, 2016 titled “City of Maple Ridge Planning Report to the Audit Committee and Council.” 7. Private committee meeting with auditorPrivate committee meeting with auditorPrivate committee meeting with auditorPrivate committee meeting with auditor Staff left the meeting at 9:45 8. Next MeetingsNext MeetingsNext MeetingsNext Meetings • March 14 – Preliminary year-end Update • April 18 – Consolidated Financial Statements AdjAdjAdjAdjournmentournmentournmentournment –––– 9:589:589:589:58 AMAMAMAM ____________________________________________ B. Masse, Chair 1 of 5 CityCityCityCity of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge TO:TO:TO:TO: Audit & Finance Committee MEETINGMEETINGMEETINGMEETING DATE:DATE:DATE:DATE:14-March-2016 FILE NO:FILE NO:FILE NO:FILE NO: FROM:FROM:FROM:FROM: Manager of Accounting MEETING:MEETING:MEETING:MEETING: Audit & Finance SUBJECTSUBJECTSUBJECTSUBJECT: Preliminary 2015 Year-End Update (General Revenue Fund) EXECUTIVE SUMMARY:EXECUTIVE SUMMARY:EXECUTIVE SUMMARY:EXECUTIVE SUMMARY: The 2015 Consolidated Financial Statements are being drafted and will be finalized following the completion of the annual audit. The purpose of this report is to provide a preliminary update on results in the General Revenue Fund. Overall, results for 2015 were positive. Revenues for the year were $142.2 million; expenses and transfers to reserves totaled $139.9 million. Preliminary results indicate we will have a General Revenue annual surplus of $2.3 million. This will increase the general revenue surplus to $9.86 million. In line with Council’s Financial Sustainability Plan, this amount is available to fund extraordinary one-time items. Key variances contributing to the overall positive results include investment returns and building permit revenues in excess of financial plan targets. On the expense side, we realized savings from the RCMP contract, principal and interest payments not required for authorized by unissued debt, and careful cost containment A detailed review of the Consolidated Financial Statements will be provided in April once the statements are finalized. RECOMMENDATION(S)RECOMMENDATION(S)RECOMMENDATION(S)RECOMMENDATION(S):::: For information only.For information only.For information only.For information only. DISCUSSION: DISCUSSION: DISCUSSION: DISCUSSION: The Financial PlanFinancial PlanFinancial PlanFinancial Plan (budget) and the Financial Statements Financial Statements Financial Statements Financial Statements are two of the most important documents produced by a municipality in a year. There are fundamental differences between the two documents that are important to understand and the following provides an overview of each. The Financial Plan Financial Plan Financial Plan Financial Plan sets out all the planned uses of funds in a year and identifies the sources of those funds. Planned usesusesusesuses include expenditures for our day-to-day operating activities, transfers to reserves and investments in the infrastructure we use to provide services to the residents of Maple Ridge. Planned sourcessourcessourcessources include property taxes, revenues from user fees, grants from other levels of government, investment income and transfers from reserves. The Community Charter requires that the total of proposed expenditures and transfers to reserves must not exceed the total of proposed revenues and transfers from reserves. The result is a “balanced budget” where planned inflows of funding are equal to the planned 2 of 5 outflows. In simple terms, the financial plan looks forward to the next five years and answers the question: “what are we going to do over the next five years, and how are we going to pay for it?” The Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements compare our actual financial performance in a year against the activities in the Financial Plan. The Community Charter requires our financial statements to be prepared in accordance with generally accepted accounting principles for local governments. In Canada, those accounting principles are set by the Public Sector Accounting Board. The goal of the financial statements is to look back at the year just ended and answer the question: “what was our financial condition at the end of the year?” The different objectives of the Financial Plan and the Financial Statements can easily result in confusion when trying to compare the two documents. For example, the Financial Plan treats transfers to and from reserves as transactions, while the Financial Statements, at the consolidated level, ignore transfers as they take place within the corporate entity. It’s important to keep those differing objectives in mind as we begin to look at financial results for 2015. General Revenue UpdateGeneral Revenue UpdateGeneral Revenue UpdateGeneral Revenue Update Local government operations are extremely diverse; our business activities range from the provision of water, to maintaining infrastructure such as roads and facilities, to developing plans guiding the community’s future, and to police and fire protection services. All of these business streams have different resource demands and while some are supported by day- to-day operations, others require long-term planning to ensure we are positioned to meet the needs of a growing community and that we build our capacity to maintain an ever growing inventory of infrastructure. Tools, such as our reserves, the General Revenue Fund and the Sewer and Water Utilities help us manage both the short and long-term demands of our business. This report will focus on operations in the General Revenue Fund as this is the area where Council has the most discretion and it is the planned transactions in this fund that drive annual property tax rates. Overall, 2015 results are positive and are shown in Appendix 1. Revenues for the year totaled $142.2 million; expenses and transfers to reserves totaled $139.9million. While these results are preliminary, they indicate we will end the year with a general revenue surplus of $2.3 million. This will bring the accumulated surplus amount in General Revenue to $9.86 million. Per Council’s Financial Sustainability Plan the accumulated surplus amount is available to fund extra-ordinary one time expenditures. Often, savings on the expense side are related to projects in progress that are not completed in the year for various reasons. For example, the timing of expenses related to Council’s incentive programs is dependent on development activity in the community. Many of the projects and studies in the financial plan take more than one year to complete, or may be deferred as immediate priorities shift. Examples include provisions for plans and studies in the Albion Flats area, costs expected as part of the exit from the Cost Share agreement for recreation, and the work required for the closure plan for the old Cottonwood Landfill site. The work, and associated budget allocation, contemplated is still needed and in order to provide for this the budget provisions are transferred to reserves as part of our year-end processes. 3 of 5 There are many factors contributing to overall results and the following table highlights some of the key variances. It is not intended to provide a comprehensive overview of all the variances, rather just highlight some of larger ones. Revenues:Revenues:Revenues:Revenues: Investment income (before transfers to reserve accounts) $ 485,000 Building permits 1,300,000 Recreation user fees 670,000 Expenses:Expenses:Expenses:Expenses: RCMP contract $ 1,731,900 Principal & Interest on authorized but unissued debt 895,000 Town Centre & Employment Lands Incentive Programs 975,000 Legal costs (113,000) Projects & Studies 3,300,000 TransfersTransfersTransfersTransfers 50% RCMP contract savings $ (866,000) 50% Building permit revenues (650,000) Interest transferred to reserve accounts (252,400) Incentive programs (975,000) Projects & Studies (3,300,000) Surplus funded and protective services provisions (1,000,000) Council has established various reserves to help manage fluctuations in certain key revenues and expenses. One of these reserves is the Police Services Reserve, established to assist with various policing and public protection issues. Council has a practice of transferring a portion of savings from the RCMP contract to the reserve each year. This practice has allowed us to manage the costs associated changing RCMP building standards and most recently provided the funding to support Council’s Resilience Initiative. In 2015 50% of contract savings, a total of $866,000, were transferred to the reserve, bringing the end of year balance to $6.7 million. Currently, there are a number of items related to the RCMP contract that have not been finalized, including the potential for retroactive pay adjustments, and this reserve will assist us to manage the costs associated with those obligations. The Building Inspection Reserve is another example of a reserve account established to manage the impact of annual variations in a particular revenue stream, specifically building permit revenues. For the past few years we have experienced little annual consistency in building permit revenue, sometimes missing financial plan targets and sometimes exceeding them. This reserve allows us to mitigate the impact of revenue shortfalls by transferring monies from the reserve in order to sustain service levels in the short term. In order to build the capacity for that strategy, in years where building permit revenues exceed financial plan targets we transfer a portion of the favorable revenues to the reserve. In 2015 building permits revenues exceeded financial plan targets by $1.3 million and $650,000 was transferred to the reserve, bringing the balance to $2.5 million. 4 of 5 CONCLUSIONS:CONCLUSIONS:CONCLUSIONS:CONCLUSIONS: Final results for 2015 will be available following the completion of the audit. In the interim this report provides an overview of fiscal performance in the General Revenue Fund for the year. Preliminary results indicate the General Revenue accumulated surplus will increase by $2.3 million to $9.86 million. In line with Council’s Financial Sustainability Plan, this amount is available to fund extra-ordinary one-time expenditures. “Original signed by Catherine Nolan” _______________________________________________ Prepared by: Catherine Nolan, CPA, CGA Manager of Accounting “Original signed by Paul Gill” _______________________________________________ Approved by: Paul Gill, CPA, CGA GM, Corporate and Financial Services 5 of 5 Appendix AAppendix AAppendix AAppendix A Actual RevenuesRevenuesRevenuesRevenues Taxes and grants in lieu 73,056,794- Fees & Other Charges 18,307,444- Investment income 1,633,640- Proceeds and Gains 1,051,307- Government Transfers 2,719,618- Gaming revenues 1,161,956- Equipment 3,382,698- DCC & Other Contributed Revenue 437,881- Collections for others 40,485,790- Total RevenueTotal RevenueTotal RevenueTotal Revenue 142,237,128142,237,128142,237,128142,237,128- - - - Expenses (excluding amortization)Expenses (excluding amortization)Expenses (excluding amortization)Expenses (excluding amortization) General Government 12,789,392 Protective Services 33,179,347 Transportation 9,020,733 Planning; Public Health & Other 6,361,513 Recreation 19,902,208 Principal Payments 2,764,386 Collections for Others 40,485,790 Total ExpensesTotal ExpensesTotal ExpensesTotal Expenses 124,503,369124,503,369124,503,369124,503,369 TransfersTransfersTransfersTransfers Transfers to/from own reserves 14,787,761- 24,545,771 Transfers to reserve funds 4,120,148 Transfers to GCF (fund inventory change)4,231 Transfers to Capital (Capital Program) 1,262,629 Interest transferred to reserve accounts 252,242 Net TransfersNet TransfersNet TransfersNet Transfers 15,397,26015,397,26015,397,26015,397,260 General Revenue Annual Surplus (Preliminary)General Revenue Annual Surplus (Preliminary)General Revenue Annual Surplus (Preliminary)General Revenue Annual Surplus (Preliminary) 2,336,4992,336,4992,336,4992,336,499- - - - General Revenue Accumulated Surplus - beginning of year 7,522,668- General Revenue Accumulated Surplus - end of yearGeneral Revenue Accumulated Surplus - end of yearGeneral Revenue Accumulated Surplus - end of yearGeneral Revenue Accumulated Surplus - end of year 9,859,1679,859,1679,859,1679,859,167- - - - General Revenue Fund Analysis General Revenue Fund Analysis General Revenue Fund Analysis General Revenue Fund Analysis For the year ended December 31, 2015 City City City City of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge TO:TO:TO:TO: Audit and Finance Committee MEETINGMEETINGMEETINGMEETING DATE:DATE:DATE:DATE: March 14, 2016 FROM:FROM:FROM:FROM: Manager of Financial Planning MEETING:MEETING:MEETING:MEETING: Audit and Finance Committee SUBJECTSUBJECTSUBJECTSUBJECT: Investment ReportInvestment ReportInvestment ReportInvestment Report ---- December December December December 2012012012015555 EXECUTIVE SUMMARY:EXECUTIVE SUMMARY:EXECUTIVE SUMMARY:EXECUTIVE SUMMARY: Money held by the City, that is not immediately required, is invested and prudently managed in order to achieve the objectives of safety, liquidity and return. The Investment Policy outlines the parameters to manage the investments. It also calls for regular updates to the Audit and Finance Committee summarizing the investments and any deviations from policy. The Investment Portfolio Summary as of December 31, 2015 is attached. It highlights that the investment portfolio had no deviations from the Investment Policy and the investments performed relatively well, with a Return on Investment (ROI) of 1.83% compared to the benchmark return of 1.16%. The average term in our holdings exceeds the average term in the benchmarks, which accounts for much of the variance in returns. The 2015 investment earnings, excluding any market value changes, totaled almost $3 million. From this, based on balances, approximately $1.6 million has been transferred to reserves and Development Cost Charges. This leaves about $1.4 million in General Revenue investment earnings. The earnings exceeded the General Revenue budget by about $230,000, resulting in a contribution to the 2015 operating surplus. RECOMMENDATION(S):RECOMMENDATION(S):RECOMMENDATION(S):RECOMMENDATION(S): NoneNoneNoneNone. . . . For information onlyFor information onlyFor information onlyFor information only.... DISCUSSION: DISCUSSION: DISCUSSION: DISCUSSION: a)a)a)a) Background Context:Background Context:Background Context:Background Context: Investment returns generate a significant amount of revenue for the City and more importantly they are invested in a way to protect the public funds ensuring that they are safe and available when needed. Council last revised the Investment Policy in June of 2011. There is currently no need to amend the policy. The calculated ROI includes unrealized gains or losses due to market price fluctuations. Including these price fluctuations is appropriate, as it more accurately reflects the value one could receive if the investments were sold. It reflects the investment decisions with respect to the timing of when different investment terms are entered into. The benchmarks also include market value changes so the comparison is relevant. As mentioned, the market value of the bonds held in our investment portfolio fluctuates. It is important to note that all our investments will mature at par at which point they will have no gains or losses. Market gains or losses are only realized if the bond is sold. As noted in the Investment Policy, deviations from policy are typical in March through early June. This is due to the size of the holdings being lowest, just prior to property tax collections, which may cause percentages on certain investment parameters to be higher. b)b)b)b) Business Plan/Financial Implications:Business Plan/Financial Implications:Business Plan/Financial Implications:Business Plan/Financial Implications: A significant portion of the funds invested are from Reserve Funds, Reserve Accounts, Development Cost Charges (DCCs) and Water and Sewer Utility Funds. The interest earned helps address inflationary costs. The General Revenue Fund relies on returns from investments. These returns are conservatively budgeted. A more aggressive reliance on investment earnings in the Financial Plan is not advised. CONCLUCONCLUCONCLUCONCLUSIONS:SIONS:SIONS:SIONS: The schedules attached highlight the return on investments and how the holdings compare to the parameters set out in the Investment Policy. There are currently no deviations. The return on investment is currently 1.83% exceeded the benchmark return of 1.16%. It is important to understand what is driving the returns as not to draw any incorrect conclusions. The primary focus of our investments is safety and being able to meet our cash flow requirements. Active management by staff, as well as insight and advice from our investment contacts ensure that funds are invested appropriately and continue to produce returns that beat the benchmark. “Original signed by Trevor Thompson” _______________________________________________ Prepared by: Trevor ThompsonTrevor ThompsonTrevor ThompsonTrevor Thompson, , , , BBA, BBA, BBA, BBA, CPA, CPA, CPA, CPA, CGACGACGACGA Manager of Financial PlanningManager of Financial PlanningManager of Financial PlanningManager of Financial Planning “Original signed by Paul Gill” _______________________________________________ Approved by: Paul Gill, BBA, Paul Gill, BBA, Paul Gill, BBA, Paul Gill, BBA, CPA, CPA, CPA, CPA, CGACGACGACGA General ManagerGeneral ManagerGeneral ManagerGeneral Manager: : : : Corporate and Financial ServicesCorporate and Financial ServicesCorporate and Financial ServicesCorporate and Financial Services City City City City of of of of Maple RidgeMaple RidgeMaple RidgeMaple Ridge Investment Portfolio Return on Investment (ROI)Investment Portfolio Return on Investment (ROI)Investment Portfolio Return on Investment (ROI)Investment Portfolio Return on Investment (ROI) For the year ending December 31, 2015 Terms Terms Terms Terms Investments (avg.)Investments (avg.)Investments (avg.)Investments (avg.) Return Return Return Return ROIROIROIROI BenchmarkBenchmarkBenchmarkBenchmark Long Term $47,574,052 $702,569 1.48% 2.44% Mid. Term 2,000,000 93,240 4.66% 1.15% Short Term 115,190,047 2,212,531 1.92% 0.63% TotalTotalTotalTotal $164,764,099 $164,764,099 $164,764,099 $164,764,099 $3,008,340 $3,008,340 $3,008,340 $3,008,340 1.83%1.83%1.83%1.83% 1.16%1.16%1.16%1.16% TermTermTermTermssss are the term when purchased, not the term remaining to maturity. For example, a 7 year investment bought in 2010 would always be classified as Long Term even when it has less than a year to maturity. Short Term is a year or less, Mid. Term is over a year and fewer than 3 years and Long Term is anything over three years. IIIInvestment (avg.) nvestment (avg.) nvestment (avg.) nvestment (avg.) is the average daily balance for the period, not the balance that is currently held. Return Return Return Return or earnings are calculated differently than accounting standards, as unrealized capital gains (losses) are included. By taking the market price fluctuations into account, the management of the investments are better measured. Benchmarks are calculated on the same basis allowing for a more relevant comparison. ROIROIROIROI is the annualized return on investment. BenchmarkBenchmarkBenchmarkBenchmark used is the MFA Money Market Fund, MFA Intermediate Fund and MFA Bond Fund & benchmarks MFA reports against. City City City City of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge Investment Portfolio Investment Portfolio Investment Portfolio Investment Portfolio SummarySummarySummarySummary As of December 31, 2015 * The province of BC has guaranteed deposits of BC Credit Unions. With this guarantee regular policy limits of $10,000,000 per credit union can be exceeded. Term to MaturityTerm to MaturityTerm to MaturityTerm to Maturity HoldingsHoldingsHoldingsHoldings % Holdings% Holdings% Holdings% Holdings Within Policy Within Policy Within Policy Within Policy Policy Max.Policy Max.Policy Max.Policy Max. Long Term (>3 years) $25,001,336 15% Yes 35% Mid. Term (> 1 year to 3 yrs.) 23,382,184 14% Yes 40% Short Term (1yr or less) 116,946,367 71% Yes None TotalTotalTotalTotal $165,329,886$165,329,886$165,329,886$165,329,886 IssuerIssuerIssuerIssuer Holdings Holdings Holdings Holdings % Holdings % Holdings % Holdings % Holdings Within Policy Within Policy Within Policy Within Policy Policy Max.Policy Max.Policy Max.Policy Max. Banks 25% per Schedule I Bank BNS $6,000,000 4% Yes CIBC 33,382,184 20% Yes TD 7,826,235 5% Yes National Bank 13,001,336 8% Yes Credit Unions None Prov. BC Guarantee BlueShore Financial 27,464,000 17% Yes Envision Financial 51,295,448 31% Yes VanCity 11,019,248 7% Westminster Savings 15,341,436 9% Yes Government Gov't - Fed. - 0% Yes none Gov't - Prov. - 0% Yes BC - none, othes 25% Gov't - Muni/ Reg. District - 0% Yes 25% Municipal Finance Authority - 0% Yes 25% Grand Total $165,329,886$165,329,886$165,329,886$165,329,886