Policy - Community Partner Reserve Management - 20241126
100 John West Way
Aurora, Ontario
L4G 6J1
(905) 727-3123
aurora.ca
Town of Aurora
Policy
Finance
Contact: Senior Financial Management Advisor, Finance
Approval Authority: Council
Effective: November 26, 2024
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Community Partner Reserve Management
Purpose
The purpose of the Community Partner Reserve Management Policy is to establish
financial guidelines and appropriate controls for the administration of Town of Aurora
Community Partner reserves.
This policy provides regulations and guidelines for appropriate reserve balances that
ensure financial stability, reporting requirements and for the management of any excess
reserve balance of the Town’s Community Partners reserves.
Scope
The scope of this policy applies to Town’s Community Partners which receive a budget
allocation from the Town with the exception to the Central York Fire Services and
Aurora Public Library as this relationship is already governed by an existing
comprehensive agreement with the Town of Aurora.
Definitions
Annual Surplus
The excess of revenues over expenses in a given year .
Community Partner
Aurora’s Community Partners which are provided operating budget funding, include:
• Aurora Business Improvement Area
• Aurora Cultural Centre
• Aurora Historical Society
• Aurora Sport Hall of Fame
• Sport Aurora
Reserve Funds
Funds that have been set aside for a specific future event either pursuant to a by-law of
the municipality, a decision by a Community Partner board, a contractual obligation, or a
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requirement of provincial legislation. Reserve funds are either “discretionary” being
those set aside by a Community Partner board of its own volition or “statutory” or
“obligatory” requirement for a specific intent.
Operating Stabilization/Contingency Reserve
Funds set aside to pay for the temporary revenue shortfalls or unforeseen expenditures
caused by significant fluctuations in the economy and provide contingency funds for a
range of different contingent or unknown liabilities.
Capital Reserve Fund
Dedicated funds in support of Community Partner capital expenditure needs such as
capital asset rehabilitation and replacement or for future growth needs.
Policy
Reserves play a vital role in maintaining financial sustainability for the Town’s
Community Partner’s financial health. Reserves may be established in support of
dedicated or specific organizational activities or used in support of bro ader financial
needs. Reserves play a key role in the management of unexpected economic impacts to
a Community Partner’s operating budget when required. Operating budget stabilization
reserves are meant to pay for budget short-falls arising from unplanned reductions in
planned revenues or unexpected expenses. By taking a long-term view of reserves,
Community Partners are able to determine their necessary annual reserve contributions
to ensure future asset management capital plan needs are met, while minimizing the
annual operating impact. This policy outlines the following guidelines and appropriate
controls for the administration of Community Partner reserves.
Types of Reserves
Operating Reserves
Community Partner operating stabilization / contingency reserve are funds set aside to
pay for the temporary revenue shortfalls or unforeseen expenditures . Reserves of this
nature provide contingency funds for a range of different contingent or unknown
liabilities. As a best practice, a Community Partner should set aside enough operating
reserves to fund no more than 12 months of regular operations.
Capital Reserves
Capital reserves are funds set aside to pay for the future capital needs of a Community
Partner for physical assets, such as a equipment, vehicle or buildings etc.
A Community Partner should assess their unique needs and plan for both expected and
unexpected replacement costs. This strategic financial stewardship brings stability and
decreases stress on both Community Partners and the Town of Aurora.
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A community partner’s need for a capital reserve will be determined by the nature and
extent of their capital asset holdings.
Program Specific Reserves
Program specific reserves or specially directed or endowed funds are established for
specific planned projects, program or initiaves. If a Community Partner receives
restricted funding in the form of a grant or donations for specific purposes then those
funds should be set aside and retained in such restricted reserve account as required. A
Community Partner should assess the unique requirements of any such grant or
donation when establishing program specific reserves.
Establishing Reserves
A new reserve should only be established if it cannot be accommodated within an
existing Community Partner reserve and / or all other possible alternatives have already
been considered.
All Community Partner reserves need to be approved by their respective board. The
Town should be notified of all additions to a Community Partner’s reserve framework
over the past 12 months as part of the annual budget process. The reserve notification
should include the reserve name, the board’s resolution to create the reserve, and
include a financial plan which identifies the target funding level (if applicable), funding
sources and projected disbursements (when practicable) to meet planned future
obligations, and other relevant information, where applicable. In consideration of the
administrative workload, a Community Partner should strive to minimize the number of
reserves.
Closing Reserves
Should a Community Partner close a reserve, the Town should be notified of this
decision as part of the annual budget process as well. The notification should include
the name of the reserve closed, the board’s resolution, the reason for closure, as well as
how any remaining reserve balance was dissolved.
Inter-fund lending
Community Partner temporary inter-fund lending between reserves is permitted to
temporarily finance capital expenditures or operating cash flow deficiencies to avoid
external temporary borrowing costs. However, the following conditions must be met:
• Borrowing will not adversely affect the intended purpose of the reserve
• A plan to repay the reserve within a reasonable timeframe, based on the nature of
the loan and ability to repay is required
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Contributions to/withdrawals from Reserves
All contributions to and/or withdrawals from reserves shall be approved by each
applicable Community Partner board. A record of all reserve transfers should be
maintained by each Community Partner.
If applicable, a Community Partner should include any planned contributions to reserves
as part of its annual operating budget.
Annual Surplus / Deficit
The primary funding source of an operating reserve are operating budget general
surpluses. Should a Community Partner have an established operating/contingency
reserve, any operating budget general surpluses should be contributed to this reserve
until such point its balance reaches the recommended target balance equivalent to cost
of its operations for a period of 12 months.
Once the recommended operating/contingency reserve ceiling has been met, any
excess proceeds over and above this amount should be applied against the Community
Partner’s identified operating requisition amount from the Town for the following year at
the time of payment. In an instance where there are excess proceeds to be applied
towards the next year’s requisition, the Town pay the net applicable balance. An
exception to this would be if the Community Partner has future unfunded asset
management obligations. However, a record of this board decision should be
maintained.
Responsibilities
Council
• Receive an update of Community Partner reserve balance(s) continuity and
framework decisions and offer feedback, if necessary
• Reserve the right to overrule a Community Partner board reserve creation or
reserve management strategy
Community Partner
• Overall responsibility for the management of reserves
• Accurate reporting of reserve continuity balances and recent reserve framwork
change decisions to the Town of Aurora
• Comply with the guidelines as outlined in the Community Partner Reserve
Management policy for the management of reserves
• On an annual basis, provide an updated reserve balance continuity and record of
reserve framework change decision summary to the Treasurer at the Town of
Aurora
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Town of Aurora, Treasurer
• On an annual basis, undertake a review of each community partner’s updated
reserve balance continuity and record of reserve framework change decision
summary
• Will determine if there are any excess proceeds within applicable Community
Partner operating reserves to be applied toward the upcoming year’s requisition
• Provide a summary of Community Partner reserve balance continuities and
record of reserve framework decisions to the Finance Advisory Committee
annually
• Ensure Community Partner overall compliance with this policy
Monitoring and Compliance
The implementation of the Community Partner Reserve Management Policy should be
monitored through:
• Annual updates to Council of each Community Partner’s reserve structure; as
well as annual updates on each reserve’s activity over the course of the past
year.
• Annual Financial Statements: A Community Partner with an annual revenue
exceeding $250,000 must provide audited Financial Statements and those where
it is required by legislation. Those not required to provide audited statement may
be subject to further reviews by Town staff.
• As part of Finance Advisory Committee reviews of a Community Partner’s
financial health, the Finance Advisory Committee (FAC) will have the opportunity
to discuss in detail established board reserve strategies, and other best practices
as they align with this policy and its regulations.
• Staff will monitor Community Partner compliance with this policy on an ongoing
basis.
CAO / directors / managers / supervisors and employees should work collaboratively to
resolve issues related to this policy. Any employee found to be disrespecting the terms
of this policy other than under exceptional circumstances, emergencies or operatio nal
requirement is subject to an investigation and discipline deemed appropriate by their
immediate supervisor, Human Resources, the Town Clerk and / or CAO.
This policy will be reviewed two years from its effective or revision date, in accordance
with the Town of Aurora’s policy maintenance schedule.
References
• Town of Aurora Fiscal Strategy