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    n-i ReportU BRAMPTON CommitteeofCouncil brampton co hOWei* Llty CommitteeoftheCouncil ofTheCorporationoftheCityof Brampton

    COMMITTEEOFCOUNCILDate: March 25,2014 DATE: April lf2o\^File: F25Subject: Capital ProgramFinancial ReviewContact: BonnieEskelson,ProjectLead,Capital ProgramFinancing(905-874-2253)Overv iew:

    At notimehasanymoneybeen"missing"from the CapitalFund. The entire$755million balanceisfully accountedfor,withallavailablefundsinvested andearninginterestincomefortheCity. Therecentlyinitiatedcapitalprogramfinancial reviewisacontinuous improvementinitiativeto buildontheongoingstaff effortstoapplyfundsanddeliverthecapitalprograminthe mosttimelyandeffective mannerpossible.WhileCouncil previouslyreceivedCapital Fund statusreportsthataddressedaggregatevariances, the current initiative identifiesaccumulatedexcessfundsandrecommendsa more rigourousintegratedprojectmanagementmodeltobeimplementedonan ongoingbasis. Thisreportalso identifiesthat the trendtowardsincreasedaccumulated unspentcapitalhasbeenmoredefinedinthe pastfiveyears.

    http:///reader/full/brampton.cohttp:///reader/full/brampton.co
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    The City'sCapitalFund, representingapproved, butunspent, capitalfinancing

    samplingofmajorprojectscompletedincommunity,operationalandadministrativefacilities,publictransitandroad networkexpansionisprovidedinthereport.ThisreportrespondstoCouncil'srequestfordetailsonthe663approvedcapitalprojectswithunspentfinancingandprovidesbackgroundontheevolutionofcapitalprogram financial reporting in recent years. While detailed reporting was limitedforthe pastfewyears,overallcapitalexpenditurevarianceswereconsistentlyreportedandexplainedinthequarterlyfinancialmanagementreports. Reinstatementofdetailedfinancialreportingonthecapitalprogramisplannedfor2014andwill ensurethatmanagementandCouncilisfully informedonthestatusofcapital projectsandtheoverallcapitalbudget.

    Furtherstepsinthisprocessimprovementinitiative,including enhancedbudgeting,projectdelivery andcontrolmechanisms,arebeingdevelopedtoensurethatbestpracticesarefollowedfortimelydeliveryofcapitalprograms. Related recommendationsareincludedinthereport.

    Recommendat ions :1. ThatthereportfromBonnieEskelson,ProjectLead,CapitalProgramFinancing,CorporateServices,datedMarch21,2014,totheCommitteeofCouncilMeetingofApril2,2014,re:CapitalProgramFinancial Review,be received.2. Thatstaff reinstatedetailedcapital programfinancial reporting toCouncilona

    semi-annualbasis,beginningwiththe2013year-endreporttobedeliveredinthesecondquarterof2014.

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    n-3Background:

    ReviewoftheCity'sfinancialresources,inthecontextofthe2014budgetprocessrevealedthatunspentfinancingintheCapitalFundhadreachedover$750million.GiventheshortageofnewfundsforthecapitalprogramandthepotentialneedfordebtfinancingtomeetalloftheCity'sinfrastructurepriorities,theExecutiveLeadershipTeaminitiatedan indepthreviewofthe unspentfundstoensurethat(a)theapprovedcapitalprogramisbeingdeliveredinatimelymannerand(b)fundsnolongerneededduetoprojectscompletedbelowbudgetorchangingprioritiescouldbereallocatedtofund newrequirements.Astatusreporton thereviewwaspresentedtoCommitteeofCouncil on March5,2014.That report identifiedtheunspentbalanceinapprovedcapitalfunding at approximately$766 million, allocated to 670 open capital projects (excluding the recently approved2014 capital budget). It also identified 144 of those projects to be closed out, themajorityofwhich had beencompleted, and 25 otherprojectsforwhichsome residualfunding could be returned. Those actions were expected to result in the release ofabout $62million for re-allocation to new capital projects, 68% from developmentsources, 17%from internalfunds including taxes, 15%from grantsandotherexternalpartners.CommitteeofCouncil requestedadditionaldetailson the make-upof theCapitalFundincluding a detailed listing of approved capital projects. This report provides a fullresponsetothatrequest,updated resultsoftheongoingproject-by-projectreview,andbackgroundon theCity'scapitalprojectreporting andcontrol processes.Curren t Si tuat ion:

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    n - 4need to be keptopenfor several yearsandaportion of theremaining funds retained tocoverwarrantyissues, constructionholdbacksandoutstandingclaimsandliabilities.While thereview in progress hasbeeninitiated bymanagementtoseekimprovementsin both theoptimum useofscarcefunds andtimely project delivery, it shouldalsoacknowledgethemanysuccessstoriesin deliveryofmajorprojects. Since2003,theCity hasconstructed $1.7 billion ofassets,all without incurring anydebtfinancing.Moreover,facilitiessuchastheRoseTheatrehavebeendeliveredata muchearlierpoint in theCity'sdevelopmentthanin otherneighbouringmunicipalities. Amongthemajorprojectscompletedinthelast10years:

    TransitservicehasexpandedwiththeZum busrapidtransit program,abusstorageandrepairfacility, the MountPleasantmobilityhuband$12 million ofconventionalbuspurchasesandrefurbishment. Theroadnetworkcontinuestoexpand,withmajorroadwideningsoverthisperiodincluding,forexample, QueenStreetEast, Heritage RoadsouthofSteeles,ChinguacousyRoad, GorewayDrive,BramaleaRoad,CastlemoreRoad,and$60 million hasbeeninvestedinroadresurfacing. Expansionofthenetworkofrecreationandartsfacilitiesincludes theSoccerCentre,CassieCampbellCommunityCentre,GoreMeadowscommunitycampusand library, expansionofEarnscliffeandCenturyGardensRecreationFacilities,theFCCC SeniorsCentre, theEbenezerHall andAlderlearestorationsandtheRose Theatre . Newparks,with$85 million forlocationssuchastheChinguacousy-QueenCommunityPark,theCreditview-SandalwoodCitywideParkandthe SpringdaleCentralCommunityPark,plus$34 million ofimprovementstoChinguacousyPark. Operationalandadministrative facilities includethePOACourthouse,the

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    KXpCAPITALCASH FLOWFORECASTVSACTUALS

    2 4 - 2 13 Year-End Figures)($Millions)

    Forecasted Actual FiscalYear Cash Flow Cash Flow Var iance Var iance

    " *2013 180 .6 134.5 46 .1 26%2012 261.8 191 .1 70 .7 2 7 %Periodof 2011 277 .1 192 . 6 84 .5 30%accumulated

    unspent - 2010 287.3 221.5 65 .8 23%funding 2009 249.1 222.0 27 .1 1 1 %2008 259 .6 156 .9 102.7 40%2007 250 .9 180.5 70 .4 28%2 0 0 6 155.8 1 6 2 . 4 6 . 6 -4%2005 120.8 141 .3 20 .5 -17%2004 8 1 . 7 106 .7 2 5 . 0 - 31%

    2013Actualsare basedonpreliminaryunauditedyear-end results.

    The CD.HoweInstitutehastwice in recentyearsproducedreportscriticalofCanadianmunicipal budgetandfinancial reporting practicesandhighlighting largevariancesinbudgetperformance. TheInstitute usedmethodology andassumptionsthatstaffconsiderquestionableatbest,asdid manyothermunicipalitiesandassociations.

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    BUDGETVARIANCES- TWOVIEWS (ExtractedfromtheCityofBrampton 2012 ConsolidatedFinancial Statements)

    ($000s) Budget Actual Variance$ Variance%Total revenues 626,377 732,994 106,617 17.0%ItemsnotincludedinbudgetDevelopercontributedassets 80,681

    Interestearned in reserves 8,373Budgetedrevenues 626,377 643,940 17,563 2.8%Totalexpenses 450,655 550,176 99,521 22.1%ItemnotincludedinbudgetDepreciation : 101,371Budgetedexpenses 450,655 448,805 (1,850) -0.4%

    CapitalProjectReviewProcessandReturnedFinancing

    CorporateServices(Finance)distributesdetailedmonthlyfinancialstatementsforeveryproject,andquarterlylistsofallopenprojectstooperatingdepartmentstaffforexplanationofexpenditurevariancesandidentificationofprojectstocloseandfundstoreturn. Resultsofthoseexercisesarepresentedinthefollowing table. Overthepast10 yearsstaffhasclosed anaverage of65 completedprojectseachyear, andhasreturnedatotalof$176.7millionfundingto theoriginalsources.CLOSED PROJECTS&RETURNOFRESIDUAL FUNDS

    #ofProjects 1Returno f FundsFiscalYear Closed ClosedProjects OpenProjects Total

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    \OSGrowthoftheCapital Fund

    Notwithstanding theseefforts, there hasbeenasteadyaccumulation ofunspentfundsoverthepast10years. Thefollowing tableshowstheactualadditionsandexpendituresdriving thebalanceeachyear. Overthissameperiod, thenumberofopenprojectshasgrown from 320in 2004toasmanyas720atthehighestpointin2013. Newaccountingstandards (PSAB)imposedbytheOntarioGovernmentasof2000haveobscuredthe reportingontheCapitalFundsuchthatthetotalunspentfundsaddressedinthis reportandshowninthistable arenot identifiableintheannualfinancialstatementsorintheCity'sannual FinancialInformationReturn. Therefore, theexternal auditors do not directly audit these numbers.AletterfromtheCity's externalauditorisappendedtothis report. It providesclarificationontherole of theauditor,which isto audittheannualfinancialstatements,and in particular, acknowledges that since the Capital Fund balance does not appear inthe financial statements it is not audited.

    UNSPENTCAPITALFINANCINGCONTINUITYSCHEDULE($millions)

    BudgetUnspent Amendmen ts & Unspent

    [email protected] Current Year Returno f Current Year [email protected] Budget ExcessFunding Expenditures December31

    a b c d a+b+c-d2003 234.7

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    needs,traffic flow concerns, all interfere with desired project timing. Regulatoryrequirements areincreasingly onerous,meaning delays in obtaining required approvalsfrom otheragencies and levels of government affectplanned project schedules.Anadditionalissueinrecentyears,howeverwelcome for the financial benefits, isthenumberofGrantsprogramsfrom otherlevelsofgovernmentandtheconditionsattachedtothesegrants. Generallytheyarerestrictedtoincrementalcapital programs(over andaboveexistingapprovedcapital budgets,notare