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Brampton report

Brampton report

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Published by torontostar
Brampton capital project financial review status report.
Brampton capital project financial review status report.

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Published by: torontostar on Mar 05, 2014
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04/23/2014

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KA-
Report
LI
jL^^ON
Committee
of
Council
hOWei
lliy 
Committee
ofthe
Council
of
The Corporation
of
the
City
of
Brampton
COMMITTEE OF
COUNril
Date:
February
21 2014
DATB:J^K^SL
File: 
F 5
Subject: 
Capital
Project
Financial
Review
-
Status
Report
Contact: 
Bonnie Eskelson, Project Lead, Capital
Program
Financing (905-874-2253)
Overview:
The
City's Capital Fund, representing
approved
but
unspent
capital financing,
currently
stands
at $766
million.
In-depth review of
the
approximately
670 open
capital
projects
(pre-2014)
has
to
date
identified 169 that
can
be closed or
the
funding
balance
reduced, with $62
million
returned to
source
for future re-allocation to
other
projects.
Review
continues
with
the
goal
of identifying additional
opportunities
for re-allocation
of funds
where
priorities may
have changed and/or
facilitating
management
decisions
on
alternative
delivery
mechanisms.
Related policies
and
procedures
are
being revised to improve control of capital
funding,
and
enhanced
project
and
financial reporting is being implemented.
Recommendations:
1.
TH T
the
report from Bonnie Eskelson, Project Lead, Capital
Program
Financing,
Corporate Services
Department,
dated
February
21,
2014,
to
the
Committee of Council Meeting of March 5,
2014,
re:
Capital
Project
Financial
Review
-
Status
Report
be
received.
Background:
In conjunction with
the
recently
completed 2014 budget process,
review of
the
City's financial
resources
revealed
that
unspent
financing in
the
Capital
Fund
had
reached
nearly $800
million.
The Executive Leadership Team determined that an in depth
review of this fund
was
in order, particularly with
the
potential
need
for
debt
financing to
ensure that
the
City's infrastructure priorities
can
continue
to
be
delivered in a timely
manner
 
Financial review of open capital projects is already carried out at least annually to
ensure
that
projects
are
closed out
and excess
funds
returned to
source
for re-allocation
to new priorities. However, with inadequate funding available to
address
all critical
needs
and
in recognition of
the
continued growth in
the
capital fund, a more rigourous
and
targeted financial review
has been
undertaken. Additionally, related
processes
and
policies
are
being
evaluated
to
ensure
that
best
practices for control of capital funds
are
followed.
Where
appropriate,
these
will
be updated
and enhanced
to facilitate ongoing
monitoring
and
control.
The
unspent
balance
in approved capital funding currently totals approximately
$766
million,
excluding
the
recently approved 2014 capital budget.
The
amount is
qualified
as
approximate
because
the
2013
year-end closing
process
is still underway
and
recording of outstanding accruals may further reduce
the
balance.
Schedule
1.
attached,
shows
the
distribution of
the unspent
funds
by program
and
by
source
of
funds:
60% of
the
funds
are
sourced
from development
charges, 68%
from all development related
sources
combined.
Only 17%
are
from internal, mainly tax
based, sources.
• 15%
are
from grants, subsidies and/or other external partners.
Only 37% of the unspent funding
has
been approved and outstanding for more than three years. For purposes of this review, three years was considered to be reasonably
normal aging for the capital program given the multi-year nature of many projects.
Therefore attention
has
been given mainly, but not exclusively, to projects approved
prior to 2011.
Finally,
75% of the unspent funds relate to the two major programs that account for
most of the City's capital investments, Public Works and Parks & Recreation.
CurrentSituation:
To date, project-by-project review
with
departmental staff
has
identified potential return
of excess project funding of approximately $62
million
through close out of projects or partial return of funds. Of the 670 currently open projects, 144
will
be closed and funding balances reduced for another 25. Several other projects remain under review.
It
should be noted that this amount includes the following previously identified items: Return of $20
million
of land acquisition funds approved in 2011 for the Sesquicentennial Park, mainly from Cash-in-Lieu of Parkland,
and
Return of $1.3
million
of Information Technology funds already approved for re
allocation through
the
2014
budget.
The returned funds
will
be
distributed approximately
as
follows:
Development Charges, $26
million
Other development related sources
mainly
Cash-in-Lieu of Parkland), $20
million
 
KM-2, 
Grants,subsidiesandvariousexternalpartners,$4million
• Internalsources,mainlytaxbasefunds,$12
million
The
precise
amounts
canonlybefinalizedthrough
the
close-outprocessforeach
project,particularly
where
individualprojectsarefundedfrommultiple
sources.
The
projectsto
be
closedhave
forthe
most
part
been
delivered
and
will
therefore
be
closedbystaffthroughnormalaccountingprocesses.Averyfew
cases
resultfromreevaluationofprioritiesortimingand
will
thereforerequireCouncilapproval.Thisapproval
will
be
requestedthroughtheCapitalBudgetreportingprocessin
thesecond
quarterof2014.
The
most
notableiteminthiscategoryis
the
SesquicentennialPark
landacquisitionproject,closingofwhich
was
proposedtoCouncilinareportinearly2013.However,formalapproval
was
notrequestedatthattime.Afewprojects
will
need
tobere-budgetedat
some
pointin
the
futurebutfunds
will
not
be
requiredfor
severalyears.
While
the
actionsidentifiedtodateandtheresultingreturnoffundsdonotrepresenta
majorreductionin
the
amount
ofunspentcapitalfunding,
the
review
has
produced
target
dates
fordeliveryof
many
oftheremainingprojectsforcontinuedmonitoringover
thecourseoftheyear.Additionally,thoseprojectswithlargefundingbalancesarebeingcategorizedtoprovideseniormanagementaclearpictureof
the
natureof
the
outstandingprograms,facilitatereviewofprioritiesand,
where
appropriate,
considerationofalternativedelivery
mechanisms.
Based
on
the
expenditurereview,
most
of
the
open
projectsarewellunderway.
The
majorityof
the
projectswitha
significantportionofthetotalbudgetunspentarerelativelyrecent.Othersaredeliveredbyexternalparties,notablydevelopers,andinvoicesareexpectedinduecourseor
have
been
receivedforworkthatisalready
done.
CapitalProjectControl
Policies
and
Procedures
Managementrecognitionofthecontinuedincreaseinunspentcapitalfundingbalances,
togetherwiththedetailedprojectreview,havehighlightedthe
need
forenhancedormodifiedprocessestofacilitateprogramdeliveryandfreeupfundingforre-allocation.
Withoutsuchchanges,anyreductionin
the
unusedbalances
will
be
temporary.
These
measures,
to
be
finalizednolaterthan
second
quarter2014,
may
include:
Documentationoftheprocedureforprojectclose-outtoclarifyresponsibilities
• Considerationofprojectfinancialcontrol
mechanismssuch
as
automaticlapse
ofbudgetsforprojectsnotstartedorinactiveforaprescribedperiod,and
alternativefunding
sources
foroutstandingliabilitiesoncompletedprojects
Considerationofbudgetprocessandmethodologyimprovements,suchas
hurdlesto
be
met
forapprovalofconstructionfunding,alternative
methods
ofreleasing
budgets
such
as
cash
flowbudgeting,andcapitalbudgetlimitsinformedbyaverageannualspendinganddemonstrateddeliverycapacity• Expandedfinancialreportingoncapitalprograms,to
be
reinstatedby
the
Finance
Division

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