PURPOSE
The purpose of this policy is to establish consistent principles, standards and guidelines for the maintenance, management and accounting of reserves and reserve funds.
The primary purpose of reserves and reserve funds is:
- Adherence to statutory requirements
- Promotion of financial stability and flexibility
- Provide a stable funding source for major capital expenditures
- Provide financial stability and flexibility for one-time or short term requirements without permanently impacting tax or other user rates
- To take advantage of financial opportunities that may arise
A current list of reserves and reserve funds are attached as Appendix A to this Policy and will be reviewed on an annual basis.
POLICY STATEMENT
The Municipal Act, 2001, section 290 provides that a municipality's budget shall set out amounts to be paid into and out of reserves. A municipality may establish reserve funds for any purpose for which has authority to spend money.
ROLES AND RESPONSIBILITIES
Municipal Council shall:
1) In accordance with the Municipal Act, 2001, develop and evaluate policies and ensure that administrative policies, practices and procedures are in place to maintain the financial integrity of the municipality
2) Approve transactions to and from reserves and reserve funds through the budget process or by specific resolution.
The Chief Administrative Officer shall:
1) Support the Treasurer in ensuring the principles and mandatory requirements contained in this policy are applied consistently across all Town departments.
The Treasurer shall:
1) Develop and update this policy as necessary and present changes to Council;
2) Ensure that the principles and requirements contained in the policy are applied consistently across all departments;
3) Perform transfers to and from reserves and reserve funds as authorized by Council;
4) Recommend strategies for the adequacy of reserve and reserve fund levels and;
5) Report the reserve and reserve fund balances and forecast to Committee of the Whole and/or Town Council as part of the annual budget process.
Departments shall:
1) Provide the Treasurer with the most current capital asset information to be used in evaluating the adequacy of the Capital Reserve and related capital replacement reserves;
2) Consult with the Treasurer when reserve or reserve funds should be established;
3) Consult with the Treasurer when the use of reserve or reserve funds is required;
POLICY
Establishment of Reserves and Reserve Funds
Reserves can be established through the following processes:
1) Inclusion in the annual operating or capital budget which is approved by Council; or
2) Council, on the recommendation of the Treasurer, may establish a discretionary reserve or reserve fund and shall establish an obligatory reserve fund;
3) Through a Council Resolution;
A reserve or reserve fund can be recommended only if at least one of the following applies:
a) The funds are intended for purchasing or maintaining capital assets;
b) The funds are donated for a specific purpose;
c) The funds are intended to fund a future liability;
d) A mandatory obligation exists; either pursuant to legislation or contract;
The recommendation to establish a new reserve will clearly identify the name of the reserve being created and the purpose for the reserve. The recommendation may also lay out targets such as a the initial contribution and funding source, a minimum balance to be maintained or an overall target to be achieved. A reserve may be amended through a Council resolution.
Transfers To and From Reserves:
1) Transfers To reserves as approved in the Operating Budget will be transferred to the reserve on an annual basis;
2) Transfers To reserves will be recommended annually;
Closing Reserves and Reserve Funds:
1) If the purpose for a reserve or reserve fund has been accomplished or is no longer needed, the Treasurer shall report to Council with a recommendation on the closure of the reserve and the disposition of any remaining funds.
Interest Allocation:
1) Reserve funds will be invested in accordance with the Town's approved investment policy. Earnings shall be credited to each separate reserve bank account that invested the funds.
2) Where multiple reserve funds are included in one bank account, interest shall be allocated to reserve funds on a monthly basis on the actual balance of the reserve fund.
3) Reserves shall not be invested and are not allocated interest.
Sale of Surplus Property:
Unless otherwise approved by Council, 30% of any proceeds received from the sale of Town properties that have been declared surplus will be allocated to the Tax Stabilization Reserve.
DEFINITIONS
Reserve Funds - Reserve Funds differ from Reserves in that they are established through contributions from external sources and its use is restricted for specific purposes. Reserve funds can further be segregated into Obligatory Reserve Funds and Discretionary Reserve Funds.
Obligatory Reserve Fund - Legislated funds that must be segregated from other funds and used only for their prescribed purposes. Examples include Development Charges, Cash in Lieu of Parkland, Cash in Lieu of Parking, Gas Tax Reserve Funds, and Building Fees.
Discretionary Reserve Fund - Established based on Council direction, to finance future expenditures for which the Town has authority to spend money or to provide for a specific contingent liability. Examples include Recreation Enhancement, Library Bequest, and Library Computer and Development.
Reserves - An allocation of net revenue from Town Programs. This type of reserve is funded through contributions from the Town's Operating Budget and allocated at the discretion of Council, often as part of an overall strategy for funding programs or projects and to mitigate operating fluctuations in revenues and expenditures. Examples include the Capital Reserve, Fleet Replacement Reserve and other Infrastructure related improvement reserves.
 Appendix A.pdf |