Report
to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels et du
développement économique
and Council / et au Conseil
12 October 2004 / le 12 octobre 2004
Submitted by/Soumis par : Kent Kirkpatrick, City Manager / Directeur
municipal
Contact Person/Personne
ressource : Lloyd Russell, Director, Financial Services and City Treasurer/
Directeur des Services financiers et trésorier municipal
(613) 580-2424 x21312, lloyd.russell@ottawa.ca
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SUBJECT: |
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OBJET : |
ADOPTION D’UN MODÈLE
D’INFORMATION FINANCIÈRE AXÉ SUR LES MEILLEURES PRATIQUES |
REPORT RECOMMENDATIONS
That the Corporate
Services and Economic Development Committee recommend Council:
1. Approve
the best-practice framework for improved financial reporting as outlined in the
“It’s About Accountability” report; and
2. Approve
the implementation plan provided in this report.
RECOMMANDATIONS DU
RAPPORT
Que le Comité des services organisationnels et du développement économique
recommande au Conseil :
1. d’approuver le modèle pour
de meilleures pratiques afin d’améliorer la communication de l’information
financière, tel que décrit dans le rapport intitulé
« It's About Accountability »; et
2. d’approuver le plan de mise
en oeuvre fourni dans ce rapport.
BACKGROUND AND OVERVIEW
On July 14, 2004, City Council adopted a new budget process that will integrate the City’s Ottawa 20/20 vision with its annual budget development and allow residents to have input in setting budget priorities in a meaningful way.
As part of this new approach, the City committed to making its budget documents easier to understand and use, and provide the kind of information Council and the public would find more helpful when making budget decisions. To that end, the City engaged Plamondon & Associates to undertake an objective, comprehensive review of municipal best reporting practices and the City’s current practices, and to make recommendations that would, if adopted, make Ottawa the municipal leader in transparent and accountable financial reporting.
The resulting It’s About Accountability report (Appendix A) contains 36 comprehensive recommendations for a new reporting framework that will move the City from financial reporting that is geared towards meeting financial requirements to reporting that is focussed on the needs of Council and the public. The framework sets out annual budget reports, interim operating and capital reports and the annual financial statements that will provide more holistic and insightful information about current City operations as well as future needs, and incorporate more performance indicators.
Should City Council approve this framework, the majority of the recommendations will be implemented in 2004, beginning with the next quarterly status report (for September 30th) to be presented to Council on November 10th. There will be a few recommendations, those that require a redesign of the financial system and the development of the Integrated Planning Framework, that will take longer, but Council and residents will see 2005 budget documents that reflect the new approach.
DISCUSSION
When reviewing the best financial reporting practices of 14 municipalities, it was determined that there was no single municipality that demonstrated best practices in every area. Current City of Ottawa financial reports have been focussed on providing information in a traditional manner that is consistent with the institutional financial needs of the organization rather than on the needs of the public. The result is that City of Ottawa financial reports have led to its recognition as a well managed, fiscally disciplined and responsible organization by international agencies like Moody’s Investor Services and the Dominion Bond Rating Service. However, these same kinds of reports have been found by Council and the public to be hard to understand, and not inclusive of all of the information they would like to see prior to making budget decisions.
The framework presented for Council’s consideration will, if adopted, make Ottawa the municipality with leading edge reporting in budgets, in operating and capital interim status reports, in annual reports and in Council orientation and briefing.
The
City’s financial documents will, when taken as a whole:
§
provide
both a social and economic context to budget information, and include linkages
to Ottawa 20/20 and the Growth Management Plans;
§
provide
both historical budget information and future-year forecasts;
§
provide
details at a level relative to the importance of the program;
§
provide
an overview of impacts on service levels and on property taxation;
§
provide
timely, regular financial status reports to Council and the public with information on variances;
§
be
more understandable and easier to navigate; and
§
be posted on the Web and produced in economical CD
versions that complement the hard copies.
A high-level summary of each of the 36 recommendations along with an implementation plan is provided below. Staff is recommending all 36 be adopted. The majority of recommendations can be implemented in 2004, but others will require system redesign and the completion of the Integrated Planning Framework prior to implementation.
New City of Ottawa
Best Practice Budget Documentation
The City’s new documents will be designed to provide Council and the public with historical, current need and future forecast information by program, with the level of detail that matches the importance of the program. It will:
1. Provide context to the budget by including an economic section
and link to the strategic plan.
The 2005 budget will include an economic overview similar to that included in the 2002 budget summary document. The linkage to City’s strategic plans will need to be developed in conjunction with the Integrated Planning Framework and is expected to be in place by the 2006 budget.
2. Provide a high level summary section – including property tax
impacts.
The 2005 budget will contain a high level summary that includes information on revenues and expenditures by type and service, staffing levels, the current year’s budget and forecast, the previous year’s actual results, a summary of the capital budget and the tax impact of the proposed budget. Key performance indicators will be included where available in 2005, and a more complete list developed for the 2006 budget.
3. Segregate
the budget between tax supported and rate supported.
The rate based operating budget (sewer and water) will be segregated in
the budget and the impact on the water/sewer rate of the proposed budget will
be identified.
4. Include
relevant reference points wherever possible.
For the 2005 budget the 2003 actual results, 2004 budget and forecast and the proposed 2005 budget will be provided at a detailed level. A two-year budget forecast will be provided at a higher summary level.
5. Establish a base budget and show service
level changes.
The 2005 budget will include the changes to the base budget as
presented in the Budget Directions report.
This means that the base increases included in MPI, the growth and
mandatory program increases will be included in the proposed 2005 budget. Those areas with service enhancements or
service reductions will be detailed separately and not included in the base
presentation so that Council can know exactly where they are enhancing or
reducing a service and what the budget impact is of those decisions.
6. Give
more prominence to revenue details.
The revenue information will be provided at the program level and
broken down into the major groups (user fees, provincial subsidy, fines, etc.)
in the 2005 budget.
7. Incorporate
performance indicators and comparisons with other cities
A section on performance measures will be included in the 2005
budget. Some of the performance
measures identified in the report are available for use in 2005; others need to
be built and will be included in the 2006 budget. The results of the Citizen Satisfaction Survey will be summarized
for inclusion in the 2005 budget and every year thereafter.
8. Prepare
a two-year forward looking budget
The 2005 budget will contain a two-year forecast of the operating
budget.
9.
Provide more content to key or large items
The standard of providing detail of every Branch in a department
equally will be discontinued, with major branch and program information
provided in more detail for the 2005 budget.
10. Include a
prominent section on user fees
A section on user fees will be included in the 2005 budget detailing
the major types of user fees and the revenue generated. The more detailed analysis on the relation
to expenditure and the historical perspective needs to be developed, and will
be included in the 2006 budget.
11. Make the
budget document easier to navigate and use
The 2005 budget will incorporate the navigation tools identified in the
report. A CD version of the final
budget will be produced for distribution to the public. The production of paper
documents will be restricted as much as possible to reduce overall cost.
12. Effective
distribution of budget documents
The distribution of the 2005 budget will be primarily through the
City’s web site. Council will be
surveyed after the 2005 budget to determine which of the improvements worked as
planned and modifications made to the 2006 budget.
13. Integrate
the capital and operating budgets
The capital and operating budgets will be integrated for the 2006
budget cycle as the change to the look of the capital budget book requires
extensive system reconfiguration.
14. Explain the
flow of capital budget and reserve funds each year.
A section in the front of the 2005 operating budget will explain the
linkage between the capital budget, the operating budget and the reserve
funds. This section will be repeated in
the capital book.
15. Provide a
long-term capital budget and financing plan
The 2005 capital budget will contain the 10-year capital plan that is
being developed as a result of the Long-Range Financial Plan 2 (LRFP2).
16. Highlight
significant capital projects.
The 2006 capital budget will include a major reformatting of capital project information so that more information is provided for the most significant projects. The 2005 budget will include most of the detailed information identified in the report. Major capital projects can be highlighted in the overview portion of the budget document.
Interim Financial Reports (Status Reports) Best Practices
Financial status reports will be timely, cover a period of time and provide information that will give Council and the public useful information on the status of its operations. The City will:
17.
Issue quarterly
financial reports on operations within 45 days of period end – capital report
on semi-annual basis.
The next quarterly status report is September 30th and it will be presented to Council on November 10th. In order to meet this deadline, the report will go directly to the Council agenda, and not through the CSEDC committee, as was originally requested by staff. The March 31st capital status report contained a detailed project status listing. The June 30th capital status report will include only a high level summary and focus on the capital budget closings and adjustments that are required. The Works-In-Progress report will be contained in the 2005 capital budget.
18.
Post interim report
on web site as soon as available.
Status reports are currently posted on the City web site. When the operating status report is sent to Councilors it will also be posted on the City web site. The report will then be included on the next Council agenda for discussion.
19.
Provide content at a
high level with adequate discussion and analysis
The operating status report currently follows the budget summary format. Comparisons are made to the budget, and a high level discussion and analysis is provided.
20.
Disclose “seasonal
budget” in interim reports.
The development of seasonal budgets will allow for appropriate budget-to-actual comparisons for those programs that vary by season. This requires a change to the system and will be in place during the 2005 year.
21.
Provide a forecast
to year- end and compute variances.
The September 30th status report will include a forecast of the 2004 year-end that will form the basis of the forecast in the 2005 budget documents. In future years the forecast will be included in the June & September reports.
22.
City “enterprises”
to prepare interim reports for Council.
The Ottawa Hydro Corporation was asked to provide quarterly reports to City council at the Council meeting of August 25th, 2004. The request for quarterly reports from the Ottawa Housing Corporation will be forwarded to the Board of Directors for their consideration.
Best Practices for Annual Reports
The City of Ottawa will prepare an annual report that will focus on accountability and results. It will demonstrate how well the City has done in meeting the objectives of the preceding year, and provide information about how well the City is progressing on its Ottawa 20/20 objectives. The City will:
23.
Produce a
professional and complete annual report.
An annual report will be prepared for the 2004 year-end results. A cost estimate of $20,000 for the production of the annual report will be added to the 2005 budget for Council consideration.
24.
Incorporate the
Strategic Plan and economic context.
The economic context section will be included in the 2004 report. The strategic plan linkages will be included as that process evolves.
25.
Include a message
from the Mayor and City Manager (governance).
The annual report will include a message from the Mayor and the City Manager describing relevant highlights from the preceding year.
26.
Provide audited
Financial Statements and use separate schedules where required.
The audited financial statements will be included in the annual report, and separate schedules will be provided to show the consolidation with Ottawa Housing Corporation. Other separate schedules providing various views of the financial results will also be considered and brought into the Annual Report in future years as the report evolves.
27.
Include management’s
discussion and analysis
A discussion and analysis section that discusses major service changes and financial highlights of the year will be provided as part of a report from the City Treasurer.
28.
Show data by
function and nature.
Data will be provided by function and nature as opposed to the current organizational presentation. This information may also be augmented through the use of additional schedules.
29.
Report on major
capital projects.
The progress or completion of major capital projects in each year will be highlighted in the discussion and analysis section.
30.
Include a section on
performance.
The City’s performance as determined through the balanced scorecard approach being developed by the Strategic Planning Group will be included when it is complete.
31.
Provide extensive
five-year historical review.
Historical data will be provided, but since the amalgamated City is only 4 years old in 2004, the historical period will evolve to a five-year review.
32.
Reference to wages
over $100,000.
The City’s compliance with the Salary Disclosure Act will be noted in the document and a link to the Provincial website identified.
33.
Disclose major
employers and/or taxpayers.
This area will be reviewed to ensure the information that is captured and presented is meaningful for the reader of the report and will be provided after that further review.
34.
Provide city contact
information and include a comment card.
A comment card and contact person will be identified within the report.
Best Practices for Briefing and Orientation
Even with the most user-friendly reporting measures in place, municipal finances will always be complex. The City of Ottawa operates 109 different service areas, each with its own separate legislative and funding framework, and City Councillors need to be fully oriented and briefed on budget and financial matters. The City will:
35.
Provide extensive
orientation for new Councillors.
The orientation for new Councillors with respect to City finances needs to be given more time than the half-day currently allotted. This will be discussed with the City Manager for implementation with the new Council in 2007.
36.
Continuously brief Council on financial
issues.
Briefings on major financial issues will be provided as required.
CONSULTATION
The Greater Ottawa Chamber of Commerce, the Canadian Federation of Independent Business, City Councillors and staff were consulted as part of the preparation of the “It’s About Accountability” report.
FINANCIAL IMPLICATIONS
The $20,000 estimated for production of the annual report will be added to the 2005 budget for Council approval.
SUPPORTING DOCUMENTATION
DISPOSITION
As indicated in the
report.