FAS-021 - Budget Monitoring Policy_2020
Title: Budget Monitoring Policy
Subject: Budget Monitoring Policy Category: Finance and Administrative Services
Policy No.: FAS-021 M&C Report No.: 2020-127
Effective Date: Next Review Date:
Area(s) this policy applies to: Cross Corporate Office Responsible for review of this Policy:
Finance and Administrative Services
Related Instruments: Policy Sponsors:
FAS-001 Asset Management Policy Chief Financial Officer
FAS-002 Investment Management Policy
FAS-003 Reserves Policy
FAS-004 Operating Budget Policy
FAS-005 Capital Budget Policy
FAS-006 Debt Management Policy
FAS-007 Wage Escalation Policy
FAS-020 Long Term Financial Plan Policy
Document Pages:
This document consists of 5 pages.
Revision History:
Common Clerk's Annotation for Official Record
Date of Passage of Current Framework:___May 25, 2020________
I certify that this Policy was adopted by Common Council as indicated
above.
______ ______2020-05-26______
Common Clerk Date
Contact: Kevin Fudge, Commissioner Finance and Administrative Services
Telephone: 506-635-2011
Email: kevin.fudge@saintjohn.ca
City of Saint John
Budget Monitoring Policy
TABLE OF CONTENTS
1. PURPOSE AND CONTEXT…………………………………………………………………………………………….3
2. POLICY STATEMENT .................................................................................................. . 3
3. DEFINITIONS ............................................................................................................... 4
4. PRINCIPLES …..................................................................................................................5
5. POLICY APPLICATION ................................................................................................. 5
6. ROLES AND RESPONSIBILITIES .................................................................................... 6
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City of Saint John
Budget Monitoring Policy
1. PURPOSE AND CONTEXT
1.1. Common Council has approved the City’s first Long Term Financial Plan to put the
City on a sustainable path going forward;
1.2. To be sustainable, the City must find ways to grow revenue but also control costs
from escalating faster than its revenue growth;
1.3. The Budget Monitoring Policy enhances budget accuracy, accountability and cost
control by ensuring budget allocations are managed and adhered to;
1.4. The Budget Monitoring Policy enhances fiscal responsibility and financial flexibility
by integrating budget monitoring practices with the City’s Reserve fund and Debt
Management strategies;
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1.5. Effective Date of Budget Monitoring Policy is January 1, 2021;
2. POLICY STATEMENT
2.1 It is a best financial practice to have a Budget Monitoring Policy to monitor financial
performance;
2.2 The Budget Monitoring Policy objectives are as follows:
2.2.1 Personnel and non-personnel budgets shall be managed separately;
2.2.2 Increase operating budget transparency & performance management;
2.2.3 Increases budgeting accuracy by ensuring annual operating expenditures
match forecasts and predefined Council approvals;
2.2.4 Increases financial control to ensure resources are funded and spent in a
fiscally prudent manner;
2.2.5 Provides enhanced fiscal oversight and supports a strategic corporate lens
throughout each fiscal year;
2.2.6 Increases financial flexibility by integrating reserve strategies with the
annual budget monitoring process.
2.3 Revenue budgets shall be carefully monitored with particular attention to:
2.3.1 Seasonality, and whether comparable to prior observations
2.3.2 Any potential volatility and the resulting impacts
2.3.3 Trends and comparison to projections
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City of Saint John
Budget Monitoring Policy
2.3.4 One time sources and Timing of receipts
2.3.5 Relationship to economic indicators
2.3.6 Changes in policy/practice of overarching governments involved in
disbursement of revenues
2.3.7 Review of patterns at other similar/related governments
2.4 Expenditure budgets shall be carefully monitored with particular attention to:
2.4.1 Wages and Benefits (Personnel) - Examine additional detail beyond just
regular payroll expenses, including hiring and vacancy information, analysis
of part-time, overtime, leave pay out and special pay, as well as whether
fringe benefit costs are within budgeted expectations
2.4.2 Goods and Services (Non-personnel) - Monitoring needs to include more
than just current expenses, but also encumbrances, outstanding purchase
orders, and major contracts to develop a better picture of not only what was
spent, but what remains to be spent
2.4.3 Service Outcomes – Determine if services are being provided as budgeted
and if additional services have been provided that were not anticipated, in
addition to trends observed that may impact whether or not spending
remains on track
2.4.4 Performance Measures – Examine performance measures and linkages to
financial outcomes. The analysis should include any changes to
goals/initiatives since budget adoption and are there any new initiatives not
initially included in the budget
2.4.5 Root cause - move beyond just identifying deviations from budget versus
actuals and work towards analyzing why deviations occurred;
3. DEFINITIONS
3.1 Personnel Costs – means the total wage and benefit costs for internal resources
(inclusive of benefits);
3.2 Non Personnel Costs - means the total amount of annual expenditure spent on
goods and services;
3.3 Surplus – means an approved annual budget amount is great than the actual spend
within a particular category;
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City of Saint John
Budget Monitoring Policy
3.4 Deficit – means an approved annual budget amount is less than the actual spend
within a particular category.
4. PRINCIPLES
4.1 Recognize in principle that all budget surpluses and deficits are non-recurring in
nature and should be treated as such;
4.2 Budget surpluses and deficits considered to be recurring shall be permanently
adjusted for in the following year operating budget;
4.3 Operating Budget surpluses for Wages and Benefits are not intended to subsidize
Goods and Services;
4.4 Operating Budget surpluses for Goods and Services are not intended to subsidize
Wages and Benefits;
4.5 Operating Budget surpluses for Wages and Benefits is appropriate to reallocate to
Goods and Services when a staff vacancy generating the surplus require third party
contracted services to maintain the service level for that particular role;
4.6 Revenues and Grants intended for resourcing programs (human resources) will not
be spent on Goods and Services;
5. POLICY APPLICATION:
5.1 Personnel budgets are not intended to subsidize non personnel budget; therefore
surpluses occurring in wages and benefits shall not be reallocated to offset budget
deficits in goods and services unless supported by a business case and approved by
the City Manager and the Chief Financial Officer;
5.2 Non personnel budgets are not intended to subsidize personnel budgets; therefore
surpluses occurring in goods and services shall not be reallocated to offset deficits
in Wages and Benefits unless supported by a business case and approved by the City
Manager and the Chief Financial Officer;
5.3 Aggregate Wage and Benefits surpluses will be applied to the Operating Reserve
until the Operating Reserve is fully financed in accordance with FAS-003 – Operating
and Capital Reserves Policy; all surpluses thereafter will be applied fifty percent to
the Capital Reserve and fifty percent to the City’s Long Term Debt Obligations;
5.4 Aggregate Goods and Services surpluses will be applied to the Operating Reserve
until the Operating Reserve is fully financed in accordance with FAS-003 – Operating
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City of Saint John
Budget Monitoring Policy
and Capital Reserves Policy; all surpluses thereafter will be applied fifty percent to
the Capital Reserve and fifty percent to the City’s Long Term Debt Obligations;
5.5 All departmental and service area surplus and deficit positions shall be analysed
annually to determine if permanent budget adjustments for the following year are
necessary;
5.6 As part of the annual operating budget process, service areas will identify one time
operating expenditures and submit proposals to fund the one time expenditure
through the use of Reserve Funds as per FAS-003 – Operating and Capital Reserves
Policy;
5.7 The City Manager and Chief Financial Officer shall make any recommendations
respecting the use of Reserve Funds as part of the Annual Operating Budget Process
and shall be in accordance with the Long Term Financial Plan.
6 ROLES AND RESPONSIBILTIES
6.1 Council shall:
6.1.1 Approve the Budget Monitoring Policy;
6.2 Finance Committee shall:
6.2.1 Recommend the Budget Monitoring Policy to Common Council for approval;
6.2.2 Review any changes to the Budget Monitoring Policy in the future.
6.3 The Finance Commissioner shall:
6.3.1 Review annually to ensure that Wages and Benefits vs Goods and Services
allocations are in compliance with the Budget Monitoring Policy
6.3.2 Recommend any changes to the Budget Monitoring Policy in the future.
6.3.3 Design an analysis framework that will monitor surplus and deficit positions
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