Council Orientation Financial Services The Corporation of the Town of Amherstburg COUNCIL...

Council OrientationFinancial Services

The Corporation of theTown of Amherstburg

COUNCIL ORIENTATION

Council Financial Training


Update on Issues in the Financial Services Department

IntroductionAs a new Councilor many of you have been entrenched in the affairs of the Town for some months now during your campaigns. I am sure you are aware that the area of financial services is a major priority to the residents of this Town.

Correcting the errors and miscommunications of the past is also the first and foremost priority of the new financial services team here at the Town of Amherstburg.

Good communication is the key to moving Amherstburg forward in an effective manner.



BackgroundThe Deloitte report outlines a number of issues that have lead to the breakdown in communication surrounding the Town’s finances.

Communication is the backbone of good government. Unfortunately this breakdown occurred at a time when the town was undertaking the largest capital projects in its history.

Between 2008-2013 Amherstburg added over $100 million dollars in infrastructure projects. In order to finance this the Town used debenture financing of $35 Million dollars. Which has brought the debt level to a total of $46 Million dollars.



The following update is designed to bring new Councilors up to speed on the financial issues and challenges faced by the Town of Amherstburg.

During this presentation we will address the following:

•The current finance team

•Current debt levels

•Current reserve levels

•Reports to be expected

•Important benchmarks

•An update on the Deloitte report

•The importance of being informed on the issues

Council OrientationFinancial Services5

Director; Financial Services

Justin Rousseau

Supervisor; Accounting

Niza Fadel

Accounts Payable

Brenda Beneteau

Accounts Receivable

Debbie Hills

Supervisor; Revenue

Elke Leblanc

Tax Clerks

Lynette SharonMena Roma


Current Financial Services Team

Director of Finance/TreasurerThe Treasurer plays a key role as a member of the Senior Management Team. In addition, as Treasurer you champion the direction and leadership of the Township's Finance Department and are responsible for managing the financial affairs of the Corporation including capital and operating budgeting, property tax, financial accounting, payroll, treasury activities and financial reporting. You are responsible for the Finance department’s vision, business plan and measuring progress to ensure expected outcomes are realized. You review and develop financial policies, procedures and internal controls to ensure efficient and effective processes and appropriate risk management strategies.



Director of Finance/Treasurer

My name is Justin Rousseau, my background is as follows:

•Chartered Accountant and Chartered Professional Accountant.

•Over 10 years of experience in accounting of which 8 years have come working in public accounting as an auditor and professional business advisor.

•I grew up in the community and have a passion to increase communication on financial matters, and help move Amherstburg forward.



Manager, Financial Services/Deputy TreasurerThe Manager of Financial Services is responsible for the presentation of the Town budget as well as budget analysis and reporting. Duties include the coordination of the budget process with all departments, preparation of monthly variance reporting, and quarterly reports to Council on financial results and forecasts. Responsible for overseeing the management of the accounting function and taxation activities in the department. Also responsible for assisting with the duties of the Treasurer on an as needed basis.



Manager, Financial Services/Deputy TreasurerWendy Dade has been with the Financial Services Department for just over one year. Her background includes :•Certified Management Accountant and Chartered Professional Accountant.

•Over 15 years of broad experience in all aspects of a Finance Department.

•She holds a strong management background.

•Wendy is born and raised in Amherstburg and she is pleased to be playing a role in moving the Town forward through proper Financial management.



Supervisor of AccountingThe Supervisor of Accounting is responsible for overseeing the financial accounting systems in an effective internal control environment. Responsible for managing the day-to-day administration of general accounting as well as accounts payable and accounts receivable. Assists the Director in the provision of financial and accounting support and recommendations to other departments and Council. Coordinates year-end audits, generates internal/external financial reports and prepares various statistical and reporting requirements.



Supervisor of AccountingNiza Fadel has been with the Financial Services Department for 2 years. Her background includes:

•Over 20 years of experience in accounting, many years working in public accounting firms.

•Many years of management experience.

•Possess great problems solving skills, and attention to details.

•She calls Amherstburg home as well, and uses her background and skill set to create working papers for the auditors and ensure proper accounting practices for the Town.



Supervisor of RevenueThe Supervisor of Revenue is responsible for property taxation which includes taxation levying and billing, payment in lieu of taxation management, arrears management, taxation write-offs and rebate processing, taxation and assessment appeal management, remittance calculation, as well as some monthly financial reporting.



Supervisor of RevenueElke Leblanc has held this position for almost 4 months. Her background includes:

•Over 20 years of experience in accounting and bookkeeping.

•Over 13 years of service with Amherstburg holding various positions in the financial services department from tax clerk, accounts receivable clerk and payroll clerk.

•Elke is very detail oriented and meticulous.

•She calls Amherstburg home, and is committed to ensuring the best tax collection service possible to our residents.


Current Debt Levels

In the recent months there has been numerous discussions on what the debt levels are for the Town of Amherstburg.

In KPMG’s presentation the differences between items that are liabilities and actual long term debt will be explained.

The following update is designed to address some of the misconceptions and give you our council the most up to date information on these loans.


Current Debt Levels

There have been a lot of misconceptions regarding the Town’s debt in the last year here are a few that are important to address with you as our new Council:

The Town Council and Administration have borrowed debt to cover operational short falls.

This is not the case. The Town of Amherstburg total long term debt of 46.6M is all tied directly to capital projects. A detailed list will be presented in the next few slides.


Current Debt Levels

The Town’s debt was not planned at all.

Prior to the beginning of 2009 the Town of Amherstburg’s total asset cost were $280M by 2013 the total asset cost of the town was $381M, which means over the past 4 years the Town of Amherstburg has invested over $100M dollars in the community. Prior to 2009 the Town of Amherstburg debt level was $13.4M. Now we sit at $46.6M, this means that for the total asset increase of $100M dollars we owe an extra $33 M or 1/3 of the total investment.

The most significant portion of this new debt $22M comes from our new Waste Water Treatment Plant. Having this plant in town aligns us for future growth and investment, It put us ahead of our neighbors as far as investment in this type of infrastructure as well.


Current Debt Levels

Why is the Town’s debt so high? Should they not have had reserves to pay for this?

Amherstburg much like other municipalities, struggles with how to keep up with increasing infrastructure needs and ways to pay for them. It would have required decades of pre planning to foresee the need to have over $30M dollars in reserves. To give you an idea of how much money the town would have to save, $30M dollars equals 2 years of our total tax revenue, with no money spent to provide services. Alternatively, it would take setting aside 5% of the current tax base, for 35 years to do what was done in the past 4 years. In addition no one would have been able to predict the amount of grant money the town would receive on those projects. This helped the Town of Amherstburg address a number of its infrastructure needs all at once. This created a great opportunity for the Town to meet a number of its long term goals while having significant portions covered by grants. This will lead to town residents being able to enjoy great services, while only paying for a portion of them. This is a message that has been lost in this media storm.


Current Debt Levels

Please Turn your attention to the comparison of debt to assets, as well as detailed listing of the Town’s loans


Current Reserve Levels

It is important to understand the cash reserves and restricted cash balances at the Town of Amherstburg.

As will be presented by KPMG there is a significant difference between an equity reserve for accounting purposes and a cash reserve established by council or mandated by the municipal act.

The following are the cash reserves and restricted cash balances of the Town.

•Development Charges Account

•Watermain Reserve

•Gas Tax Account

•Life Cycle Replacement Reserve

•Restricted Cash Fund for Future Employee Benefits

•Restricted Cash Funds for Ranta Memorial Park



Development Charges•This account is mandated by the municipal act and is earmarked for use on capital projects with development related growth.•The history of this account is, it was unfortunately used to cover short falls in cash flow for capital funding going back a number of years. This is allowed under the municipal act, however amounts borrowed must be paid back at some point with interest.•The accounting figures of this account did not match its cash balance. A full reconciliation of this account back a number of years has now been completed by the current Financial Services Department. •A plan to fully fund the account is now in place. The majority of these funds are now properly allocated into this account and the balance sits at approximately $4,260,000.•The cash balance of this account will be reported to council on a quarterly basis.•Transfers out of this account will only be made to pay for capital projects which Council has approved, and the use of Development Charges as a funding source.



Watermain Reserve•Contributions are based on a $2,000 dollar fee when a resident severs a lot.

•These funds are placed into the Watermain Reserve bank account.

•The money is earmarked for the future replacement of watermains.

•The current balance in the account is approximately $455,000 dollars.



Gas Tax•Each year the Town is given funds from the collection of gasoline tax by the federal government, these funds must be spent on infrastructure for the Town.

•These funds must be spent on specific projects as recommended by administration.

•The Town receives approximately $1 Million dollars a year in gas tax. This years current project which was earmarked for gas tax is Sandwich Street, repaving project, along with a few other small projects.

•This fund is now in its own bank account and will be reported on quarterly.



Life Cycle Replacement Reserve•This reserve was funded per the 2014 budget which earmarked $658,000 to go into this account.

•The reserve currently sits at $700,000.This is because the proceeds of land sales and an energy rebate where directed into this account.

•When Town properties are sold the proceeds of these dispositions should go into this account. This way proceeds from past capital of the Town, can help to fund future capital.

•This reserve will continue to be budgeted for and will be a key part to the Amherstburg ability to have significant cash balances to enjoy flexibility in projects and will help us not rely as heavily on debt financing in the future.



Restricted Cash Fund For Employee Future Benefits•In 2008 it was passed that new hires for the town of Amherstburg would not have employee future benefits for life. A separate benefits plan was created for them which they would fund, and a portion would be matched by the Town.

•In the past these funds were not broken out, they have now been separated into a bank account. Interest on the borrowed funds have been calculated and paid.

•The amount in this account is approximately $125,000 it is fully funded and reconciled.



Restricted Funds for Ranta Memorial Park•In 2004 a bequest was made to the Town, to be used for improvements and maintenance to Ranta Memorial Park. This amount should have gone into a restricted bank account, it did not, it was put into the town operating account.

•The amount has now been moved to its own account and is to be used only as specified for the Memorial Park.

•The current amount in this account is $156,653

•The amount is inclusive of Interest that has been calculated based on prime rates and amounts to $22,721.


Reports to Be Expected

The following is a list of important financial reports to know about as a new Councilor:

•Annual Audited Financial Statements

•Annual Financial Information Return

•Annual Budgets for Operations

•Annual Budget for Water and WasteWater

•Annual Strategic Financial Plan

•Quarterly Budget to Actual Updates for Operations

•Quarterly Reserve Reports

•Quarterly Capital Work Updates



Annual Financial Statements•The Annual Financial Statements are audited each year by a independent public accounting firm using the accounting standards for the public sector (PSAP) •The Audit is done on our year end balances at December 31, It is conducted by the firm of KPMG in early April and will be presented to council by KPMG in late May to early June. •The Audited Financial Statements means that the numbers disclosed in the financial statements are correct in all material respects.•The Audit is done based on a number or test and procedures to determine that the numbers in the financial statements are complete, accurate, exist and are properly valued in all material respects. •The Audit is conducted under the strict guidelines of the Institute of Chartered Accountants of Ontario•These financial statements have important numbers for which a key understanding of what they mean has been presented by KPMG in part one of Council training.•In the past these audits were behind but we are now caught up and will ensure they never fall behind again.


Report to Be Expected

Annual Financial Information Return•The Annual Financial Information Return is a document which is prepared and submitted to the Ministry of Municipal Housing and Affairs.

•This document is done based on the December 31 year end results and must be submitted by June 30 of the following year.

•This document is a mandatory filing and is needed to ensure good standing with lenders and the Ministry.

•There was problems with this being filled on time in the past but it was filed on time in 2013, and will be going forward.



Annual Budget for Operations•The Town of Amherstburg has 3 main business activities, General Rate, Wastewater and Water services.

•The Operating Budget deals with the general rate business operations which includes the following services:

•Police & Fire

•Parks and Recreation

•Public Works (including roads and infrastructure)

•Administration (including clerks department, finance and the CAO)

•Council

•Economic Development (including planning and building department)

•Information Technology


Reports to be Expected

Annual Budget for OperationsThe operating budget and it’s workings are to be presented in detail in the next council training session.

•The operating budget is approximately $23 Million dollars in annual revenue.

•It is important to note that the budget should be presented in December or January to ensure that the figures for the upcoming year are finalized prior to getting to far into the fiscal year.



Annual Budget from Wastewater and Water•The Wastewater and Water Rate Models deal with setting the rates for both services.

•Operating budgets feed into the models along with capital spending requirements to assist in establishing the rate.

•The total combined Revenue for both the Wastewater and Water budgets is approximately $10 Million in annual revenue.



Strategic Financial PlanThe Strategic Financial Plan(SFP) will give the town guidance on where we are heading by assessing financial implications of current and proposed strategic directions and priorities. The SFP includes strategies, principles and policies to guide financial decision-making as well as a 10-year financial projection. The purpose of the SFP is to measure the Municipality’s capacity to meet operating needs as well as to implement the strategic priorities of Council. It creates a purposeful approach to long-term financial management and helps align short term actions with long term financial strategies.



Strategic Financial Plan•The Strategic Financial Plan will be presented in December or January and will be the first document of this nature produced for the Town of Amherstburg.

•It will take a cash flow approach to projecting out, operating cost, capital expenditures as well as loan repayment of existing debt and loan repayment of new debt for all 3 of the main revenue streams of the Town.

•It will provided the Town with a balanced approach to building reserves as well, financing its capital projects, and using debt strategically.

•This document needs to be a live moving document that is revised as the town’s needs change and as cost of construction projects change. It should be reviewed annually.



Quarterly Budget to Actual Reports•Supported by the Deloitte report quarterly budget to actual documents will be presented to council for quarters ending March, June, Sep, Dec.

•Quarterly budget to actual reports will be issued approximately 1 ½ months after the end of each quarter, on the operating, wastewater and water budgets of the Town.

•There is also a projected year end value to give council an idea of where the budget is expected to come in at for the December year end.

•This year end forecast amount comes from department managers, as they are best informed on the working of their department. They are also responsible for the maintenance and monitoring of their respective budgets.

•This report will be a great tool for Council, and Administration to monitor progress and question departments that run over budgetary cost.



Quarterly Reserve Fund Reports•The new quarterly fund reports will outline all of the cash reserve funds as well as the restricted cash balances.

•It will allow Council to monitor the use of reserve funds and be informed on their balances going forward.

•The reports will include the following accounts:– Development Charge account

– Watermain Reserve account

– Gas Tax account

– Life Cycle Replacement Reserve account

– Employee Benefits account

– Ranta Memorial Park restricted cash account

– New cash reserves as approved by Council.



Quarterly Capital Expenditure Reports•The quarterly capital expenditure reports will outline the capital works the Town has on the go and give council an update on the projects and their costs.

•There are times when the Town is not doing much in the way of capital and these reports may not be needed, however if this is the case an information report will be presented stating that fact.


Important Benchmarks

Review of Benchmarks•When reviewing the Town’s figures it is always important to review benchmarks. They let us know where we are compared to our neighbors.

•Using benchmarks allows us to see where we are doing a good job and where we need to improve as a community.

•It can also provided us with a goal to achieve. As well as a quantitative measurable on how we are progressing to achieving that goal.

•In the following slides we will look at benchmarks for assets, debt, equity, operating revenue and expenses.



Assets Per Capita•Due to our recent investments in the Town we have the highest asset per capita in Essex County.

•This means we have the best and most up to date infrastructure per resident in the county.

Assets Per Capita (December 31, 2013)

TCA(NBV) Population (Stats Can 2011) Assets Per Capita

Town of Amherstburg $245,101,506 21,556 $11,370

Town of Essex $182,629,575 19,600 $9,318

Town of Tecumseh $217,763,801 23,610 $9,223

Municipality of Lakeshore $283,477,279 34,546 $8,205

Town of LaSalle $229,587,555 28,648 $8,015

Municipality of Leamington (2012)

$205,512,001 28,403 $7,235

Town of Kingsville $128,320,892 21,362 $6,007



Debt Per Capita•This type of investment in infrastructure is also tied directly to our debt levels.•It should come as no surprise that with this type of investment, our long term debt per capita is also the highest in Essex County. •Another factor that is important to consider is the timing of the debt, we are at the very front end of the life cycle on the new loans.

Debt Per Capita(December 31,2013)

Debt Population(StatsCan 2011) Debt Per Capita


Municipality of Leamington (2012)

$47,149,274 28,403 $1,660

Town of LaSalle $33,124,162 28,643 $1,156

Town of Tecumseh $26,815,906 23,610 $1,135

Town of Essex $22,026,910 19,600 $1,123

Municipality of Lakeshore $25,150,456 34,546 $728

Town of Kingsville $12,861,945 21,362 $602



Surplus Per Capita•A company’s shares are usually a measure of its’ equity, which is calculated using the formula “assets – liabilities= equity” this shows you the strength of the company as a whole.•It does so by looking at the company's assets and liabilities, and operational effectiveness over time.•In the municipal world this equity is called accumulated surplus.

Accumulated Surplus Per Capita (December 31, 2013)

Accumulated Surplus Population (StatsCan 2011) Surplus Per Capita

Town of Essex $193,608,456 19,600 $9,877

Town of Tecumseh $221,110,421 23,610 $9,365


Municipality of Leamington $237,915,967 28,403 $8,376

Municipality of Lakeshore $265,806,227 34,546 $7,694

Town of LaSalle $217,026,084 28,643 $7,576

Town of Kingsville $126,964,008 21,362 $5,943



Revenue Per Capita•An important figure is how much revenue does a municipality generate on a per person basis.

•You will see that Amherstburg is at the bottom of this list, which means we bring in the least dollars per resident in the county from a total revenue standpoint.

•Note **** The Municipality of Lakeshore was able to secure significant grant funding in the year.

Revenue Per Capita (December 31, 2013)

Property TaxRevenue

Total Revenue Population (Stats Can 2011)

Property Tax Revenue per Capita

Total Revenue Per Capita

Municipality of Leamington

$25,790,255 $56,152,420 28,403 $908 $1,976

Town of Tecumseh $19,281,257 $40,814,408 23,610 $816 $1,728

Town of Essex $12,776,238 $33,816,072 19,600 $657 $1,725

Municipality of Lakeshore ***

$22,524,785 $59,527,371 34,546 $652 $1,723

Town of LaSalle $23,439,478 $46,513,086 28,643 $818 $1,623

Town of Amherstburg

$16,904,137 $34,609,842 21,556 $784 $1,605

Town of Kingsville $12,476,899 $25,561,159 21,362 $584 $1,196



Expenses Per Capita•Another important figure is the total amount of expenses a municipality pays on a per person basis.•You will see that Amherstburg is at the top of this list, which means our levels of service are some of the best in Essex County.

Expense per Capita (December 31, 2013)

Total Expenses Total Expenses less amortization

Population Expenses per Capita

Total Expenses less amortization per Capita

Municipality of Leamington

$48,470,912 $40,996,573 28,403 $1,705 $1,443

Town of Amherstburg

$36,267,836 $26,162,644 21,556 $1,682 $1,213

Town of Essex $30,918,518 $22,609,131 19,600 $1,577 $1,153

Town of LaSalle $43,691,987 $36,331,284 28,643 $1,525 $1,268

Town of Tecumseh $31,252,388 $25,270,080 23,610 $1,323 $1,070

Town of Kingsville $26,630,369 $18,470,124 21,362 $1,245 $864

Town of Lakeshore $39,043,147 $31,202,283 34,546 $1,130 $903


Update on the Deloitte Report

Update on the Deloitte ReportIn January of 2014, Council initiated requests of the Ministry of Municipal Affairs to conduct an audit regarding the Town’s financial situation. Over several months of dialogue between the Ministry and the Town, a Memorandum of Understanding was agreed upon for a financial services review and By-law 2014-29 was adopted by Council on April 7th, 2014. The Ministry undertook a procurement process and the successful proponent engaged by the Ministry on behalf of the Town was Deloitte LLP. A field review was undertaken by Deloitte between June 25th, 2014 and July 15th, 2014. On August 11, 2014, Deloitte LLP presented the Town with the Town of Amherstburg– Financial Management and Practices Review Report. The report contained 41 recommendations to assist the Town in addressing a number of high profile financial matters, annual operating deficits and long term debt. The report outlines areas of improvement to ensure the Financial Services Department of the Town reaches a mature state.



Update on the Deloitte ReportAdministration has been working on many of the recommendations contained within the report. Upon a detailed review of the report, Administration has prioritized and divided the recommendations contained within the report into 6 major projects of focus. Those projects are as follows:

1.Development and Approval of a Strategic Financial Plan for the Town of Amherstburg

2.Development of increased monitoring and reporting practices for capital projects and expenditures.

3.Development of financial reporting practices to Council.

4.Develop and implementation of a Council training session on the presentation and understanding of financial information pertaining to the Town of Amherstburg

5.Development of an enhanced policies and procedures for the Financial Services Department, inclusive of the roles and responsibilities of financial staff.

6.Development of internal control mechanisms to evaluate and monitor the policies and procedures for the major accounting streams.



Update on the Deloitte ReportThe following is a table on the progress of the Deloitte Report. It illustrates the recommendations completed, those in progress, and those still to be done.

Should further detail be needed on the details of this report please turn your attention to the report to council dated November 17, 2014..


The Importance on Being Informed on The Issues

• Now more then ever it is very important as new Councilors to be informed on the issues and the financial implications of those issues.

• It is our goal in finance to help ensure that this occurs. The quarterly reports to council will go a long way in helping with this.

• Another factor that will help is that finance will be reviewing all Council reports going forward, to ensure Council is informed on any financial aspects.

• There will be times when you may have questions regarding items. I want to ensure you that this department will get the answers you need to help make decisions.

• It will be very important to work together to provided a consistent informed message on the issues.


Conclusion

The challenges you as a new Councilor, and us as an Administration face are not an easy ones. We must work together to build reserves, fund capital, find service efficiencies all while trying to maintain the smallest impact on our residents pocketbooks.

I am confident we can overcome these challenges and do what is best for the Town of Amherstburg. I will leave you with two quotes from Theodore Roosevelt.

•“Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty… I have never in my life envied a human being who led an easy life. I have envied a great many people who led difficult lives and led them well.”

•“In any moment of decision, the best thing you can do is the right thing. The worst thing you can do is nothing."

Council Orientation Financial Services The Corporation of the Town of Amherstburg COUNCIL...

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