Local Government Financial Budgeting
Financial budgeting is a planning tool that enhances local government accountability and service delivery, and sets out their legal expenditure authority. Legislation establishes requirements and deadlines for adoption of financial plans, and a local government may amend its plan during the year for unexpected expenditures.
Local governments must annually adopt a financial plan in accordance with the Local Government Act and the Community Charter. The planning period for the financial plan must include the current fiscal year and the next four fiscal years (five-year plan). At a minimum, the plan must include:
- Proposed expenditures (operating, capital, interest and principal payment on debt), funding sources (for example, taxes, fees, grants, new borrowing and debenture debt), and transfers to and from reserve funds and surplus
- Objectives and polices for the fiscal year regarding distribution of funding sources, the distribution of property taxes amongst various property classes, and the use of any permissive tax exemptions
A local government must not budget for a deficit (planned expenditures and transfers to funds cannot exceed planned revenues, transfers from funds, and other cash contributions). However, if actual expenditures and net transfers from the previous year exceed that year's revenues and contributions, the resulting deficiency must carried forward to the current year's financial plan as an expenditure.
Municipalities must adopt their financial plans before they adopt their annual tax rate bylaws (which must be adopted before May 15 each year). Regional districts must show their accounting for each service separately and must adopt their financial plans by March 31 of each year. The earlier date for regional districts is to provide them time to prepare their annual tax requisitions for their member municipalities and the Provincial Surveyor of Taxes.
Prior to adopting the financial plan a local government must undergo public consultation. The level of public consultation is not defined in legislation, and may include opportunities for citizens to review, comment and pose questions regarding the financial plan at a local government meeting.
Proposed expenditures for a local government may include the amounts required:
- To pay interest and pay principal on debt
- For capital purposes
- To cover a prior year deficiency
- For other purposes (all other expenditures that do not fall into one of the prescribed categories)
Proposed revenue sources may include:
- Property value taxes
- Parcel taxes
- Fees and charges
- Grants and transfers
- Development cost charges
- Borrowing and liabilities
- Interest earned on investments
Proposed transfers between funds may include the:
- Amount to be transferred to and from each reserve fund
- Aggregate amount to be transferred to and from accumulated surplus
Limit on Expenditures
The financial plan establishes a local government's expense authority. Thus, a local government cannot make an expenditure that is not included in the financial plan. If an unexpected expenditure arises in the year, the financial plan must be amended prior to the expenditure taking place. This amendment requires the local government to undergo public consultation prior to adopting the amendments.
If an emergency expenditure arises that was not contemplated in the financial plan, a local government may make an expenditure for the emergency but must, as soon as practicable, amend the financial plan to include the expenditure and the funding source for the expenditure.
A local government should have established procedures to authorize emergency expenditure and provide a report for such an expenditure to the municipal council or regional district board at a regular meeting.