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THE CORPORATION OF
THE TOWNSHIP OF SOUTH ALGONQUIN
BY-LAW NO. 21-650
BEING A BY-LAW TO ADOPT A RESERVE AND RESERVE FUND POLICY
WHEREAS the Municipal Act S.O. 2001, c.25 section 417 authorizes reserves and reserve
funds
AND WHEREAS the Council of The Corporation of the Township of South Algonquin is
authorizing reserves and reserve funds in accordance with the Municipal Act S.O. 2001, c.25
NOW THEREFORE the Council of The Corporation of the Township of South Algonquin
hereby enacts the following as a By-Law;
1. THAT the Council for the Township of South Algonquin hereby adopts the Reserve
and Reserve Fund Policy attached hereto as Schedule "A" and forming part of this
By-Law;
2. THAT this By-Law shall come into force and take effect on the date of its final
passing.
3. THAT the CAO / Clerk-Treasurer for the Township of South Algonquin is hereby
authorized to make minor modifications or corrections of a grammatical or
typographical nature to the By-Law and schedule, after the passage of this By-Law,
where such modifications or corrections do not alter the intent of the By-Law.
4. THAT any other By-Law inconsistent with or antedating this By-Law is hereby
repealed.
READ A FIRST & SECOND TIME this 7th day of July, 2021.
_________________________
______________________________
Jane A.E Dumas, Mayor
Bryan Martin, CAO Clerk-Treasurer
READ A THIRD TIME AND PASSED this 7th day of July, 2021
_________________________
______________________________
Jane A.E Dumas, Mayor
Bryan Martin, CAO Clerk-Treasurer
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POLICY MANUAL
POLICY NO. FIN-004-01
For Township of South
Algonquin
EFFECTIVE DATE: July 7, 2021
Revised:
SUBJECT: Reserve & Reserve
Fund Policy
DEPARTMENT: Finance
LEGISLATIVE AUTHORITY
Section 417 of the Municipal Act, 2001 (the Act) allows for the establishment of reserve funds and
outlines the requirements regarding the procedures in allowing for the use of reserve funds as follows:
"Reserve funds" Every municipality and local board, as defined in the Municipal Affairs Act, and any
other body exercising a power with respect to municipal affairs under any Act in unorganized
territory may in each year provide in its budget for the establishment or maintenance of a reserve fund
for any purpose for which it has authority to spend money. 2001, c. 25, s. 417 (1).
"Approval" If the approval of a municipality is required by By-Law for a capital expenditure or the
issue of debentures by or on behalf of a local board, the local board must obtain the approval before
providing for a reserve fund for those purposes in its budget. 2001, c. 25, s. 417 (2).
"Expenditure of Reserve Funds" A municipality may by By-Law, provide that the money raised for a
reserve fund established under subsection (1) may be spent, pledged or applied to a purpose other
than that for which the fund was established. 2001, c. 25, s. 417 (4).
In summary, a municipality may establish reserve funds and may pass by
laws to authorize expenditures from those funds.
DEFINITIONS
Reserves are appropriations from net revenue at the discretion of Council, after the provision for all
known expenditures. It has no reference to any specific asset and does not require the physical
segregation of money or assets as in the case of a reserve fund. A reserve cannot have a revenue or
expense of itself, like a reserve fund.
Reserve Funds are assets that are segregated from the general revenues of the municipality and are
restricted to meet the purpose of the reserve fund. Obligatory and discretionary reserve funds may be
established. Discretionary Reserve Funds are established in cases where Council wishes to earmark
funds to finance a future expenditure for which it has authority to spend money and physically set
aside for such purpose. The funds may be used for several different purposes, such as known or
unknown contingencies (e.g. building repairs).
Obligatory Reserve Funds are reserve funds that must be created by statute whereby special funds are
received or obligated for specific purposes and must be segregated from the general revenues of the
municipality (e.g. Gas Tax Rebate). These funds must be used solely for the purpose prescribed for
them by statute.
INTRODUCTION
This policy is intended to set out the principles, mandatory requirements and guidelines for
establishment, intention, maintenance, management and accounting treatment for Reserves and
Reserve Funds, both obligatory and discretionary.
The primary source of revenue for reserves is from current operations, usually surpluses at year-end
or as a deliberate segregation during budget deliberations. Reserves are generally referred to as "rainy
day funds" to mitigate fluctuations in economic factors, changes in government funding,
unanticipated events and contingent liabilities. They are also used to accumulate funds to finance
large capital projects to avoiding debt financing
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Reserve Funds differ from reserves in that they are segregated and restricted to meet a specific
purpose as defined by the Municipal Act. For example, under the Chartered Professional Accountants
(CPA)Canada Public Sector Accounting Board (PSAB) guidelines, development charges must be
reported as deferred revenue (a liability) or a reserve fund. Capital costs eligible for development
charge funding must be growth related capital improvements.
Reserves and Reserve Funds are financial management tools that are an essential part of a sound
fiscal policy to address long-term objectives. The goal is to fully fund the annual capital plan through
current reserves while delivering efficient, effective programs to the citizens of Township. The key to
reserve policies and planning is to balance current and future requirements. Sound program and
financial planning would accommodate future growth while maintaining relatively steady tax rates.
The maintenance of adequate Reserves and Reserve Funds is critical to the Municipality's long-term
viability. The overall reserve amounts established should be between 25% and 50% of annual
operating expenditures unless otherwise stated under reserve/reserve fund listing. The amounts are
also to be established to fund unknown contingencies or liabilities that the municipality may incur in
the future.
REQUIREMENTS
1. Establishment of new reserves and reserve transactions must be supported by a resolution/By-Law
of Council.
2. All new reserves and reserve transactions must be authorized by Council through the annual budget
process.
3. In-year reserve transactions not contemplated during the budget process shall be authorized
through a resolution of Council and will also require a budget amendment to be approved by Council.
4. Following the resolution of Council, the Treasurer has the sole authority to perform transactions to
and from reserves for the amount budgeted. Transfers from reserves shall be for the actual
expenditure/costs up to the approved budgeted amount.
RESPONSIBILITIES
Council
The Role of Council is provided in Section 224 of the Act as follows: "It is the
role of council,
a) to represent the public and to consider the well-being and interests of
the municipality;
b) to develop and evaluate the policies and programs of the municipality;
c) to determine which services the municipality provides;
d) to ensure that administrative practices and procedures are in place to implement the
decisions of council;
e) to maintain the financial integrity of the municipality; and,
f) to carry out the duties of council under this or any other Act. 2001, c. 25, s. 224."
As such, Council has the ultimate authority for policy development and ensuring that administrative
practices are in place to implement those policies. As well, policies should be in line with the financial
integrity of the municipality. Therefore, the adoption of this policy and any changes to this policy
must be approved by Council.
Council has the responsibility to establish reserves and ensure that transactions to and from
reserves are authorized, through the budget process or by specific resolutions.
Chief Administrative Officer
The CAO is responsible for supporting the Treasurer and Council in ensuring the principles and
mandatory requirements contained in this policy are applied consistently across all departments.
Treasurer
The Treasurer or their designate is responsible for:
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- Developing and updating this policy as necessary and present changes to Council,
- Ensuring that the principles and mandatory requirements contained in this policy are applied
consistently across all departments,
- Analyzing reserve status on a regular basis and ensuring that accounting principles are followed,
- Performing the transfers to and from reserves as authorized by Council; and,
- Provide an annual report to Council on the status and amounts of each reserve and reserve fund
balances to ensure appropriate target levels have been met as outlined in this policy and for other
information purposes.
Department Heads
The Department Head or their designate is responsible for informing the Treasurer when reserve
transfers are required as per the resolution of Council, providing documentation relating to the reserve
transfer; and consulting with the Treasurer for advice regarding the interpretation of this policy.
ESTABLISHMENT OF RESERVES
Types of Reserves
Maintaining adequate reserve balances serves several municipal purposes. These include but are not
limited to:
- Asset Replacement: established to smooth the spikes in operating budgets and smooth out property
tax changes when replacing tangible capital assets;
- Project Reserves: established to provide cost effective self-borrowing mechanisms to reduce long-
term debt and the risks associated with interest rate fluctuations;
- Economic Stability Reserves: established to buffer against significant fluctuations in the economy;
- Contingency Reserves: established to accommodate contingent, unfunded or known liabilities for
current and/or future years;
- Working Fund Reserves: established to provide cash flow for operations to eliminate the
requirement to borrow funds to meet immediate obligations; and,
- Self-Insurance Reserves: established to provide self-insurance provisions.
Purpose of Reserves
For each reserve the establishing resolution/By-Law shall have a description of the purpose and how
the reserve may be utilized. Current and future areas of risk and exposure to economic volatility need
to be identified for each reserve. The purpose of the reserve may be legislated.
Level of Reserves
Each reserve shall identify the methodology to be utilized to determine the level of the reserve, the
target level for the reserve, how the reserve is replenished and/or its date for elimination of the
reserve. Service standards and capital planning and the related performance measures should be used
to determine the appropriate level for the reserve.
Interest Allocation
-
Reserve funds will be invested in accordance with the Municipality's investment policy.
Earnings shall be credited to each separate reserve fund bank account that invested the
funds.
-
Interest shall be allocated to the reserve funds based on the actual balance of the reserve
fund.
-
Reserves shall not be invested and are not allocated interest.
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Temporary Reserve Fund Borrowing
-
Temporary borrowing to cover a reserve short-term deficit, interim servicing requirements
or internal financing is permitted, when justified, adequately supported and authorized by
Council. The following conditions must be met to allow borrowing from reserve funds:
-
Borrowing must not adversely affect the intended purpose of the reserve fund.
-
A plan to repay the reserve fund within a reasonable timeframe is required and must be
documented.
-
Interest, equivalent to the Municipality's interest on the reserve fund bank account, will be
applied to outstanding amount borrowed.
-
Where applicable, legislative requirements may apply.
RESERVES/RESERVE FUND LISTING
General Reserve
13-1000-1000 (Discretionary)
POLICY: To assist in periods throughout the year when cash balances are low and there is a
requirement to cover payments and expenses, before taxes, grants and other revenues become
available, or any other expense that Council sees fit.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and
budget approved contributions
from the operating budget.
The use of these funds is general
in nature and this balance is
intended to act as working capital.
Expenditures
will
include
financing operating deficits if they
arise and specific operating and
capital expenditures as approved
by council.
Minimum target level of 20% of
operating expenditures.
Elections Reserve
13-1000-2000 (Discretionary)
POLICY: Established to fund a municipal election over 4 years, rather than funding the entire
cost in the year of the election.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through
approved budget
allocations.
Election related
expenses.
$35,000 at the beginning of an
election year.
General Government Facilities/Equipment Reserve
13-1000-3000 (Discretionary)
POLICY: To provide funding for corporate facility upgrades, betterments and replacements to
include the Township Office and the Seniors Center. To provide funding to comply with newly
developed provincial or federal policies, practices or reporting methods (PSAB/AMP),
significant upgrades or replacement of any financial/accounting software and/or computer
hardware. To provide funding for Council laptops each new term.
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REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and
any
budget
approved
contributions.
To use the funds for facility and
equipment maintenance,
upgrades, or replacements.
At the discretion of Council.
Accessibility Reserve
13-1000-3100 (Discretionary)
POLICY: To be within compliance of Ontario laws that set standards for accessibility, under
the Accessibility for Ontarians with Disabilities Act, 2005. The Municipality is committed to
creating an accessible organization by removing barriers for people with disabilities.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through
approved budget
allocations.
To use funds to create an
accessible environment within
any municipally owned facility
or property.
At the discretion of Council.
Gas Tax Reserve Fund
13-1000-5000 (Obligatory)
POLICY: To provide funding to investments in Environmentally Sustainable Municipal
Infrastructure (ESMI) Projects and Township Building Projects as per the Agreement for the
Transfer of Federal Gasoline Tax Revenues.
REVENUES
EXPENDITURES
TARGET LEVEL
The Municipality receives a semi-
annual allocation of funds from
the AMO on behalf of the Federal
Government per the Agreement
for the Transfer of Federal
Gasoline Tax Revenues.
Expenditures to support
environmentally sustainable
municipal infrastructure to help
ensure cleaner air, cleaner water,
and reduced greenhouse gas
emissions. Eligible project
categories are; public transit,
water, wastewater, solid waste,
community energy systems, local
roads, bridges, tunnels, active
transportation infrastructure, and
Township building.
The Gas Tax Rebate Reserve
Fund amount should represent
the revenues allocated to
Township only and cannot go
below zero at any time.
Insurance Reserve
13-1000-6000 (Discretionary)
POLICY: The Insurance Reserve provides for insurance premiums, claim deductibles, and
self-insurance.
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REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and
any budget approved
contributions.
Expenditures from the
Insurance Reserve are made to
offset any deficit for insurance
expenses in the operating
budget.
At the discretion of Council.
Fire Facilities/Equipment Reserve
13-2000-1000 (Discretionary)
POLICY: To provide financing for operating costs, capital projects, protective services, etc.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and
any budget approved
contributions.
To use funds for current or
future capital expenses to
include vehicle and equipment
maintenance, betterments, and
replacements. Other
expenditures include financing
an operating deficit if one
should occur during the fiscal
year.
At the discretion of Council.
Building Reserve
13-2000-3100 (Discretionary)
POLICY: The Building Standards division must report their surpluses and deficits to the
industry as a separate entity; surpluses cannot be used to fund general Township expenditures,
and deficits should be funded from a Reserve and not from the Municipal funds. For this reason,
the Building reserve was established to provide for capital expenditures and revenue
stabilization, as building permit activity is highly cyclical.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and
any budget approved
contributions.
To stabilize the building permit
revenue line in the operating
budget and to fund Building
Standards division capital
expenditures.
Maintain a minimum equal to 12
months of projected operating
expenses to mitigate cyclical
drops experienced, or when the
economy faces a recessionary
period.
Emergency Measures Reserve
13-2000-4000 (Discretionary)
POLICY: To mitigate the impacts of unforeseen events, natural disasters, extraordinary
expenditures or reductions in revenue.
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REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
The use of these funds is general in
nature and this balance is intended to
act as working capital. Expenditures
will
include
financing
operating
deficits if they arise, and specific
operating and capital expenditures as
approved by council.
At the discretion of Council.
Roads Reserve
13-3000-1000 (Discretionary)
POLICY: To assist in smoothing budget to actual fluctuations, finance capital projects, or
any other road expenses that Council sees fit.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus
and any budget approved
contributions.
To fund repair, refurbishment,
and replacement costs
associated with Municipal
roads and bridges.
At the discretion of Council.
Transportation Facility Reserve
13-3000-2000 (Discretionary)
POLICY: To provide funding for works department facility upgrades, betterments and
replacements to include the works department building and the sand dome.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end
operating/
capital
surpluses
and
any
budget
approved contributions.
To use funds for current or future
capital expenses to include facility
upgrades,
betterments
and
replacements.
At the discretion of Council.
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Transportation Fleet/Equipment Reserve
13-3000-3000 (Discretionary)
POLICY: To provides a source of funding for the replacement of vehicles and equipment. Each
request for expansion funded from the Reserve must be made clear during the capital budget
process and in the purchase report to Council.
REVENUES
EXPENDITURES
TARGET
LEVEL
Year-end
operating/
capital
surpluses and any budget approve
contributions from the budget.
To use funds for current or future
capital expenses to include vehicle
and
equipment
maintenance,
betterments, and replacements. Other
expenditures include financing an
operating deficit if one should occur
during the fiscal year.
At the discretion of Council.
Winter Control Reserve
13-3000-4000 (Discretionary)
POLICY: To provide funds for winter maintenance in the event of a shortfall in the Winter
Control operating budget. The Reserve aids in minimizing the financial implications resulting
from extreme winter weather conditions.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations and from
annual operating winter control
surpluses, if any.
This Reserve provides additional
funding for winter maintenance
expenditures on Municipal roads
in the event of a deficiency in the
Operating Budget amount for
winter control.
The Winter Control Reserve
balance is recommended to
be equal to an annual budget
amount of winter
maintenance costs.
Landfill Closure Reserve
13-4000-1000 (Discretionary)
POLICY: To provide a fund for closure and post closure costs.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and any
budget approved
contributions.
To be used for direct expenses
relating to any Municipal-owned
Landfill.
Up to 100% of the estimated future
closure and post closure
liability costs of both Whitney &
Madawaska landfill locations.
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Landfill Site Facility/Equipment Reserve
13-4000-2000 (Discretionary)
POLICY: To provide funds for landfill facility upgrades, betterments and replacements and
other eligible operating or capital project expenses.
REVENUES
EXPENDITURES
TARGET LEVEL
Year-end operating surplus and any
budget approved
contributions.
To be used for direct expenses
relating
to
the
Whitney
&
Madawaska landfill locations.
At the discretion of Council.
Health Facility/Equipment Reserve
13-5000-1000 (Discretionary)
POLICY: To provide funds for health facility upgrades, betterments and replacements and
other eligible operating or capital project expenses.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating to any Whitney Medical
Center.
At the discretion of Council.
Helipad Reserve
13-5000-3000 (Discretionary)
POLICY: To provide funds for the paving of the helipad located in Whitney.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating to paving the Helipad
located in Whitney.
$25,000
Social Facility/Equipment Reserve
13-6000-1000 (Discretionary)
POLICY: To provide funds for Resource Center facility upgrades, betterments and
replacements and other eligible operating or capital project expenses.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating to any Resource Center
located in Whitney.
At the discretion of Council.
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Recreation and Culture
Facility/Equipment/Programming Reserve
13-7000-1000 (Discretionary)
POLICY: To provide funds for Recreation facility upgrades, betterments and replacements and
other eligible operating or capital project expenses for all municipally owned parks, skating
rinks, and docks.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating
to
any
Recreation
programming, facilities, parks, and
docks.
At the discretion of Council.
Recreation Committee Reserve
13-1010 (Discretionary)
POLICY: To provide funds for Recreation programs and the Raise the Roof project.
REVENUES
EXPENDITURES
TARGET LEVEL
Recreation committee donations.
To be used for direct expenses
relating
to
any
Recreation
programming for the Murchison &
Lyell/ Whitney Recreation groups,
and the Whitney Recreation Raise
the Roof project.
At the discretion of Council.
Recreation Raise the Roof Reserve
13-7000-1100 (Discretionary)
POLICY: To provide funds for Whitney Recreation Raise the Roof project.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating to any Recreation Raise
the Roof project.
At the discretion of Council.
Library Facility/Equipment/Programming Reserve
13-7000-4000 (Discretionary)
POLICY: To provide funds for Library facility upgrades, betterments and replacements and
other eligible operating or capital project expenses for both Whitney and Madawaska Public
Libraries.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
To be used for direct expenses
relating to any Library facilities,
equipment and programming.
At the discretion of Council.
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Planning Reserve
13-7000-8000 (Discretionary)
POLICY: Given the Planning department's sensitivity to volatile and declining economic
trends the reserve balance is intended to mitigate any future financial risk or smooth impacts.
REVENUES
EXPENDITURES
TARGET LEVEL
Generated through approved
budget allocations.
Used to offset unfavorable
revenue variances due to
economic conditions.
At the discretion of Council.
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