WHEREAS the Council of the Regional Corporation has by resolution adopted on the 13th June, 1996 authorized a by-law establishing financial controls related to the current budget, capital budget and reserve management of the Regional Municipality of Peel;

NOW THEREFORE the Council of the Regional Corporation enacts as follows:

1. Peel Budget Philosophy: A Long Term Perspective

The success of the Peel budget process rests on the solid foundation of our budget principles. Five budget principles guide staff throughout the budget process:

a) Sustainability - Budget decisions made today should be affordable today and tomorrow.

b) Interdependency - Capital and operating budgets are interdependent. Capital decisions will invariably have mill rate implications for the following budget year.

c) Pay as You Go - Peel's future will not be mortgaged by debt. Asset replacement will be well planned and appropriate down payments on infrastructure will be made.

d) Fee for Service - Peel will ensure that user fees will be used to cover costs for appropriate services.

e) Management Excellence - Peel will maximize program efficiencies while maintaining program effectiveness.

a) Position Titles

i) Council means the Council of the Regional Municipality of Peel;

ii) Chief Administrative Officer means the Chief Administrative Officer of the Regional Municipality of Peel;

iii) Department Head means the head of any Regional department or board or agency for which the Region provides funding;

iv) Treasurer means the Treasurer and Commissioner of Finance of the Regional Municipality of Peel;

v) Manager and/or Director means the person in a Regional department or board or agency who is responsible for planning and implementing a Regional current/capital budget or a portion thereof.

b) Organizational structure:

i) Region means the Regional Municipality of Peel;

ii) Division means a part of a Regional department or board or agency headed by a single Manager, for which a separate financial summary for the program or business unit is presented in the current/capital budget document;

iii) Cost Centre means a part of a division which represents the lowest defined level of service delivery for accounting purposes, and has its own distinct name and number in the Regional accounting system, with applicable coding to identify it as a current budget cost centre, capital project cost centre or a reserve management cost centre;

iv) Account means a classification of expenditure or revenue within a cost centre to which an estimated budget value or actual expense/revenue amount is assigned;

v) Reserves and Reserve Funds mean all 3 digit balance sheet cost centres summarizing to summary centre '5' titled Reserves and Reserve Funds in the Regional accounting system.

c) Budget Terminology

i) Current Budget means the expenditures, revenues, staff complement and the quality and quantity of services to the public formally approved for current Regional operations from January 1st to December 31st each year;

ii) Capital Budget means the expenditures and financing sources to acquire or construct Regional assets approved for capital Regional spending from January 1st to December 31st each year;

iii) Current Forecast and Capital Forecast means the expenditures and funding sources projected for consideration in the subsequent 4 and 9 years of the Current Budget and Capital Budget approval year, respectively;

iv) Redeployment means the transfer of a budget value from one cost centre or account to another within the same budget category of current, capital or reserve management, thereby changing the purpose for which funds will be spent;

v) Restructure means the transfer of an accounts budget or actual value from one cost centre to another to reflect a reorganization, but which does not change the purpose for which funds are budgeted or spent.

d) Finance Terminology:

i) Over (Under) Financed means the surplus (deficit) of revenues over expenditures to date applied to a capital project cost centre;

ii) Funded (Unfunded) Debt means debenture financing for which the actual debentures have (have not) been issued and sold, with the proceeds ultimately applied to their respective debenture financed capital project;

iii) OMB Debt Ratio means the ratio of net long term contractual liabilities divided by own fund revenue fund expenditures, calculated in accordance with the current Regulation (799/94) under the Municipal Act;

The current budget financial principles of the Region shall be as follows:

a) to ensure that departmental services approved by Council as part of the current budget are carried out within the departments net expenditure approved current budget funding and that deviations from this by-law are reported to and reviewed by the Chief Administrative Officer or Council as set out herein;

b) to recognize that Department Heads and their Managers are accountable to the Treasurer, the Chief Administrative Officer and Council for their spending, revenue generating and service delivery performance against budget approvals;

c) to stress that budget planning is a primary management responsibility.

The current budget financial principles of the Region shall be implemented as follows:

a) all current budgets and departmental reports to Council seeking authority to materially alter the quality and quantity of service provided must first be approved by the Treasurer to ensure accuracy of financing sources and conformity with Regional financial policy and then shall be reviewed by the Chief Administrative Officer, a budget Ad hoc Committee (unless otherwise directed by Council) and shall be approved by Council;

b) Departments, boards and agencies for which the Region provides funding shall annually prepare their current budgets and subsequent four year forecasts in accordance with the following process:

i) the Chief Administrative Officer sets spending guidelines for the current budget and forecast. The Finance Department sets the parameters for estimating current impacts, such as inflation, interest, and asset depreciation guidelines. Population, demographic and housing data are generated by the Planning Dept. for use in demand assumptions. Figures are requested in future dollars from the departments;

ii) budgets are estimates using standard costing methodologies, and are subject to any specific direction provided by the Province, Council, or Chief Administrative Officer;

iii) single item non recurring purchases such as equipment shall be included in the capital budget if estimated at more than $100,000, and single item purchases valued at less than $100,000 shall be reviewed individually by the Chief Administrative Officer for inclusion in either the current or capital budget;

iv) the Treasurer and Commissioner of Finance sets the general parameters for calculating asset replacement contributions, including standard depreciation terms, rate of return on sinking funds, and inflation, resulting in a series of equal contributions, for each asset, as follows:

a) buildings 40 yr. straight line

b) equipment, general purposes 10 yr. straight line

c) vehicles or special purpose equipment determined by program or special equipment manager

d) road, waste, water, sewer determined by program infrastructure assets manager based on database of experience.

v) The current budget and forecast shall include:

a) gross and net expenditure for program/business units;

b) service level indicators;

c) comparative benchmark corporate performance indicators;

d) an assessment of annualized current impact for the first 5 years of the capital plan, including operating costs, replacement contributions, and debt servicing costs;

e) the annualized current budget impact of a capital project which shall be budgeted for in the program's operating budget in the year of capital approval as an additional contribution to a capital reserve, providing budget room for the future annualization of the impact of irreversible prior year capital decisions;

vi) single item purchases ineligible for current budgeting and all projects dependent on reserve or debt financing shall be governed under the controls for capital projects;

c) Council shall be informed on a timely basis of any material variance between planned current budgets and actual expenditures, actual revenues, or actual service level quality/quantity performance deliveries. Council shall receive written status reports on the current operating budget on a triannual basis as at April 30th, August 31st and December 31st of each year. Current operating budget spending shall be subject to the following requirements:

i) a department shall not incur any exceptional or new expenditure of a type, kind or extent that materially alters the quality or quantity of service provided until such changes are approved by council;

ii) until the current operating budget for a Regional fiscal year is approved by Council a cost centre manager is authorized to make spending commitments with a cumulative total that does not to exceed 50% of the prior year's council approved budget appropriation.

d) Divisional Directors/cost centre managers have the responsibility to provide the budgeted level/quantity of service approved by Council with the corresponding discretionary spending authority within the approved net expenditure current operating budget for the division/cost centre, subject to the following:

i) goods and services shall be expensed in the year in which they are actually received, in accordance with generally accepted accounting practices;

ii) unanticipated revenues which are not dependent on expenditures to provide a service shall not be spent or committed without Council approval; at year-end such remaining revenues shall become part of the Regional surplus in the same manner as underspent budgets;

iii) budgets are not to be redeployed to compensate for existing over expenditures;

iv) directors/managers financial stewardship performance shall be measured against the bottom line management of the net expenditure actuals compared to budget, with revenue and expense line account variances between budget and actual to be expected, monitored and controlled in the context of quantity and quality of service delivered;

e) redeployments of current budgets between the following entities under Column A shall require the following approvals under Column B:

f) notwithstanding Section 6 (f):

i) redeployments of current budgets shall not be approved for certain accounts which shall be specified by the Chief Administrative Officer immediately following adoption of the budget estimates;

ii) redeployments which materially change the budgeted objectives or service levels shall require approval of the Chief Administrative Officer up to a total departmental impact of $100,000 within existing authorized complement staff approvals or approved contract staff budget estimates;

iii) redeployments which materially change the budgeted objectives or service levels with a departmental impact of more than $100,000 or require additional increases to authorized complement staff levels or approved contract staff budget estimates shall require Council approval;

iv) only redeployments which, in the opinion of the Treasurer, are significant and material shall be processed.

g) the Chief Administrative Officer is authorized to make contributions to or withdrawals from the Working Funds reserve and/or other tax supported Regional reserves, where to do so is not contrary to law, to fix the Regional surplus in tax supported programs at the end of the current year, based upon the recommendation of the Treasurer, for the purpose of reducing or eliminating unanticipated changes in future realty tax mill rates, where such changes would otherwise occur as a result of changes in the current budget surplus for the year. All such contributions or withdrawals shall be reported to Council in the Year-End Triannual Report;

h) the Chief Administrative Officer is authorized to make contributions to or withdrawals from the Utility Rate Stabilization reserve and/or other rate supported Regional reserves, where to do so is not contrary to law, to fix the Regional rate supported program surplus, or deficit, at the end of the current year, based upon the recommendation of the Treasurer, for the purpose of reducing or eliminating changes in future utility user fees. All such contributions or withdrawals shall be reported to Council in the Year-end Triannual Report;

i) tax or rate supported programs surplus (deficit) management stabilization contributions to (or withdrawals from) the Working Funds reserve or Utility Rate Stabilization reserve respectively, shall be accounted for in segregated sub-accounts for each department which will be made available to departments in subsequent years to manage transitional fluctuating expenditure or revenue pressures on their budgets so as to encourage continuous productivity improvements. The Chief Administrative Officer is authorized to approve mid year budget redeployment contributions to or withdrawals from the Working Funds reserve or Utility Rate Stabilization reserve of up to $100,000 for a department as transitional funding to meet an unanticipated expenditure pressure or revenue windfall that was not budgeted for by a department. All such contributions to or withdrawals from reserve shall be reported to Council in the next Triannual report.

a) Sustainability - Budget decisions made today should be affordable today and tomorrow.

b) Interdependency - Capital and operating budgets are interdependent. Capital decisions will invariably have mill rate implications for the following budget year.

c) Pay as You Go - Peel's future will not be mortgaged by debt. Asset replacement will be well planned and appropriate down payments on infrastructure will be made.

d) Official Plan Financial control objectives and policies will be in accordance with guidelines as incorporated in the Regional Official Plan - Regional finances Section 7.9.

The capital budget financial principals of the Region shall be implemented as follows:

a) all capital budgets and departmental reports to Council seeking authority for the release of funds and commencement of the capital project must first be approved by the Treasurer to ensure accuracy of financing sources and conformity with Regional financial policy and then shall be reviewed by the Chief Administrative Officer, a budget Ad hoc Committee (unless otherwise directed by Council) and shall be approved by Council;

b) Departments, boards and agencies for which the Region provides funding shall annually prepare their capital budgets and subsequent nine year forecasts in accordance with the following process:

i) the Chief Administrative Officer sets spending guidelines for the capital budget and forecast. The Finance Department sets the parameters for estimating current impacts, such as inflation, interest, and asset depreciation guidelines. Population, demographic and housing data are generated by the Planning Dept. for use in demand assumptions. Figures are requested in future dollars from the departments;

ii) budgets are estimates using standard costing methodologies, and are subject to any specific directions provided by the Province, Council or Chief Administrative Officer;

iii) in order to avoid major shifts to the capital financing plan, new entries introduced to the capital budget/forecast are not to be scheduled in any of the first three years (must be scheduled in years 4 - 10), unless projects of equal value are deferred;

iv) the Treasurer and Commissioner of Finance sets the general parameters for calculating replacement contributions, including standard depreciation terms, rate of return on sinking funds, and inflation, resulting in a series of equal contributions, for each asset, as follows:

a) buildings 40 yr. straight line

b) equipment, general purposes 10 yr. straight line

c) vehicles or special purpose equipment determined by program or special
equipment manager

d) road, waste, water, sewer determined by program infrastructure assets manager based on database of experience.

v) The capital budget and forecast shall include:

a) the ten year project list and capital works in progress list;
b) a project description including location and ward;
c) a financing plan for each capital program;
d) an assessment of annualized current impact for the first 5 years of the capital plan, including operating costs, replacement contributions, and debt servicing costs;
e) the annualized current budget impact of a capital project which shall be budgeted for in the program's operating budget in the year of capital approval as an additional contribution to a capital reserve, providing budget room for the future annualization of the impact of irreversible prior year capital decisions;
f) an assessment of overall debt impact in terms of the Ontario Municipal Board debt ratio methodology.

c) Council shall be informed on a timely basis of any material variances between planned capital budgets and actual expenditures or actual service level quality/quantity performance deliveries. Council shall receive written status reports on capital works in progress including a summary of major activity and all pre-approved unallocated project activity, on a triannual basis as at April 30th , August 31st and December 31st of each year;

d) until the capital budget is approved by Council, no department shall commence any capital project that was not authorized in prior years unless:

i) approval as granted by Council via a report outside the budget process;

ii) the project is authorized under a standing pre-approved unallocated project, such as:

a) Unallocated Pre-approved Design - Roads, Water, and Sewer , with budgets set for each annually in the capital budget, and administered under authority delegated to the Treasurer and Commissioner of Finance and the Commissioner of Public Works;

b) Unallocated Pre-approved Routine Equipment Replacement funded by replacement reserves, with a budget set annually at $250,000, administered under authority delegated to the Treasurer and Commissioner of Finance;

c) Venture Capital Fund - (unallocated revolving loan fund) - administered under authority delegated to the Chief Administrative Officer;

e) notwithstanding Section 6(d), in the event of an emergency requiring capital repairs, the Chief Administrative Officer is authorized to create a new capital project, and to authorize its funding from sources recommended by the Treasurer with subsequent reporting of said emergency capital project to Council;

f) after approval of the capital budget and forecast, projects designated with the status P for pending will require separate approval from Council before funds will be released or project tenders may commence. All other projects in the capital budget will be denoted A and approved for release of funds and commencement of capital works;

g) capital project financing sources are to be authorized by resolution, and where debenture financing is prescribed, a by-law is required; capital project financing procedures shall include:

i) upon Council approval of a project's financing sources by resolution or by by-law (where debt financing is specified), Finance will open appropriate accounts, encumber the appropriate financing sources, and advance funds as expended in accordance with a just in time financing practice so that, interest earned on project financing accrues to the source reserve until funds are spent;

ii) when external financing sources such as subsidies and/or debt comprise the financing of a project, they are transferred to the project upon recognition of the related receivable;

iii) departmental applications for external subsidy or other revenue are submitted to the Finance Department for review, and are to be added to the Region's list of receivables, prior to submission to the applicable external agency;

iv) when a project is under (over ) financed, the resulting temporary interest charges (revenues) shall accrue to the program's Capital Financing Stabilization reserve, at a nominal rate determined by the Finance Department and based on monthly established rates of return on reserves;

v) unanticipated capital revenue, which may be accrued when extra work has been done on the project by the Region on behalf of developers or other municipalities, shall be credited to the project.

h) approved works in progress must be resubmitted to Council if and when the project or its budget are substantially altered. Substantial is defined herein as a significant change to the service to be rendered by the project, or an increase in the revised net budget which is greater than $100,000 or 10% of the previously approved net Regional financed expenditures;

i) when capital projects are completed over budget, the Treasurer is authorized to allocate additional funds of up to 10% of the gross expenditure budget to a maximum of $100,000. These allocations shall be reported to Council in the triannual report on capital works in progress;

j) Regional staff shall not commit capital projects to expenditures which will have the affect of exceeding the net Regionally financed capital program budget allocation by greater than 10% or $100,000, unless approved by Regional Council;

k) capital budgets shall not be redeployed, except restructures for administrative purposes as approved by Department Head, or administrative consolidations of phases of similar capital projects approved by Department Head, or as permitted by section 6 (l) or section 6 (m);

l) where Council has approved a program's capital budget financing envelope as part of the annual capital budget approval process, redeployments of the program's capital budget financing sources between capital projects within the same program may be recommended by the Department Head and Director to recognize refinement of specific project spending estimates of costs to complete. Such redeployments are subject to authorization by the Treasurer of the amended financing sources. These redeployments between projects of one's surplus to anothers deficit shall be reported to Council in the triannual report on capital works in process;

m) the unallocated project for each capital program shall be consolidated annually by rolling forward the prior year unallocated project balance to the current year unallocated project immediately following capital budget approval for the current year. The Treasurer, in consultation with the Department Head, shall annually assess the adequacy of the unallocated project balance and remove any excess financing encumbrances from the original source;

n) when capital projects are completed under budget, encumbrances for unapplied capital financing sources shall be removed subject to the following:

i) first, if applicable to reduce any related unfunded debt or debentures in process applicable to the particular project. Excess funded debt, if any, shall be used to reduce unfunded debt requirements of other projects, within the same rate source (tax or rate supported);

ii) second, to the appropriate project capital financing reserve; and

iii) third, if capital financing reserves were not used, to the appropriate tax/rate stabilization reserve;

iv) these transactions will be reported in the next Triannual Report.

o) the completion status of capital projects shall be assessed on a timely basis and the following close-out procedures for substantially completed projects shall be followed.

i) the Director responsible and the Project Engineer/Manager will sign off that the project is complete and all expected revenue and expenses, including holdbacks, have been accrued in the project accounts;

ii) at project close-out encumbrances for unapplied capital financing sources are removed in accordance with section (n);

iii) once the project is closed, any over(under) accruals pertaining to the closed project will be charged to the relevant program's unallocated capital project.

p) single item purchases ineligible for current budgeting and all projects dependent on reserve or debt financing shall be governed under the controls for capital projects;

q) development charges shall be allocated and managed in a manner consistent with the Development Charges by-law; and

r) debt servicing costs for non-growth related debt are charged to the current budget. Debt servicing costs for growth temporary borrowing costs are capitalized by charging to the capital project, for recovery from future development charge collections.

The reserve management financial principles of the Region shall be implemented as follows:

a) to ensure that all Regional reserves and reserve funds are supported by a financial plan identifying contribution sources and projected disbursements required to meet planned future obligations to be funded by reserves;

b) to classify all Regional reserve and reserve funds by purpose, and based on that purpose, ensure all disbursements from reserves and reserve funds are through a capital project or current budget cost centre;

c) to expand on reporting of Regional reserves and reserve funds to include annual long term forecasts to permit optimization of the allocation of funds; and

d) to ensure the sustainability of Regional programs by providing planned annual contributions for the future replacement of Regional infrastructure.

The reserve management financial principles of the Region shall be implemented and enforced as follows:

a) creation of a new reserve requires Council authorization in the form of a resolution and creation of a new reserve fund requires Council authorization in the form of a by-law, identifying the purpose of the reserve/reserve fund, sources of contributions to the reserve/reserve fund and intended future withdrawals from the reserve/reserve fund;

b) a financial plan forecasting reserve balances compared to target funding objectives to meet identified future liabilities is to be updated at least annually by the Reserve Manager based on the best currently available information and shall be reviewed by the Treasurer;

c) all contributions to and/or withdrawals from reserve and reserve funds shall be approved in advance by Council, normally as part of the annual current and capital budget approval process or specifically by resolution with the following exceptions:

i) allocation of external revenues as a direct contribution to reserves, such as development charge collections or settlements on account of prior year events are permissible at the Treasurer's discretion. Allocations which in the Treasurer's opinion are significant, will be disclosed to Council in the reserve triannual report;

ii) transfer of funds between reserve cost centres for reserve restructures which, in the opinion of the Treasurer, have not changed the purpose for which the funds were intended;

iii) transfers that are the direct result of surplus management, as permitted by sections 4-(h), (i), (j) of the financial control by-law.

d) all contributions to or withdrawals from reserves/reserve funds shall be clearly identified and segregated on the Regional accounting system and flowed through either a current budget cost centre or a capital project cost centre based on the following major reserve classifications and their respective transfer authorities;

ii) permitted disbursements from reserves to current budget or capital project cost centres shall be credited through a 95** series account summarizing to Transfers from Reserves as a revenue type item within the applicable cost centres;

iii) expenditures for goods, services, wages or contracts may not be charged directly to reserves. Such items must be expensed in a capital project or current budget cost centre.

e) the Treasurer and Commissioner of Finance shall prudently invest reserves and reserves funds to meet the objectives of the reserve and the related net investment income shall be credited monthly to the specific reserve according to its proportionate share of the investment portfolio's weighted average rate of return for realized income during the prior month;

f) the balance of the unappropriated Working Funds reserve shall be managed to a tolerance range of 5% - 10% of the Regional tax supported gross expenditure budget; the balance of the Utility Rate Stabilization reserve shall be managed to a tolerance range of 5%-10% of the Regional rate supported gross expenditure budget.

g) a triannual reserve report shall be presented to Council summarizing the current general ledger status of Regional reserves and reserve funds at April 30th , August 31st and December 31st of each year;

h) annually, the Treasurer and Commissioner of Finance will present to Council a 10 year reserve forecast of all Regional reserves and reserve funds based on the capital plan and all other relevant information; and

i) intra-reserve borrowing within the development charge reserves that may be required to avoid external temporary borrowing costs are permissible, provided that any investment income be retroactively reimbursed to the source reserve;

j) the Treasurer is authorized to make accounting reclassifications (i.e. aggregation/disaggregation ) of existing reserves to provide improved reporting and/or matching of funded reserves to future obligations within the same major reserve categories of:

i) Development charges reserves

ii) Non-growth capital financing/infrastructure reserves

iii) Stabilization and Operating reserves.

For tax supported or rate supported reserves. Such reallocations are to be subsequently reported to Council in the Triannual reserve report. Council authority is required to transfer reserves balances between tax and rate sources or between the aforementioned reserve categories.

READ THREE TIMES AND FINALLY PASSED IN OPEN COUNCIL this 13th June, 1996.