Budget Format and Presentation Budget Challenge Working Group Ottawa City Council July 9, 2008

1. Budget Format and Presentation Budget Challenge Working Group Ottawa City Council July 9, 2008 Plamondon & Associates Inc.

2. Project • Recommendations on format for the 2009 budget document: • Tax supported operating and capital budget • Councilor perspective: concise, clear and comprehensive of content from the 2008 budget binder • Informed by analysis of 2008 budget document - other city budgets - and feedback from Councillors and staff • Recommendations on the design of a Budget Challenge Working Group • Mandate to vet and add credibility budget estimates produced by staff

3. Operating Budget • Crafting the budget document a process of continuous improvement • 2008 budget contains basic data required for Council approval plus considerable detail on departments/branches and programs • Document design makes it unnecessarily voluminous and in some areas confusing (especially the summary) • Some key analysis, perspectives and accountabilities are absent

4. What the current operating budget estimates do not tell Councillors? • Percent changes in all categories • Various revenue totals • Total revenue, residential property taxes, commercial property taxes, government grants, user fees etc. • Police data • Spending estimates based on actuals/forecast • Expenses by nature/object for the corporation in meaningful detail • Summary of cost allocations from centres of excellence with percent changes by year • Reconciliation of the changes and balances in reserve and reserve funds • Fiscal framework analysis and assessment … continued

5. What the current operating budget estimates do not tell Councillors? • Corporate and departmental totals for: • Costs to maintain • Costs of growth • Costs of legislated pressures • Costs of new programs • User fees • Budget adjustments and technology gains (i.e. one-time) • Program data: • Efficiency target • Revenues • Net cost (requirement) • FTE • Outcome-based performance management indicators and targets

6. What is included in the new operating budget format? • All perspectives/data listed on two prior slides, plus: • Drill-down user friendly format to help comprehension • Analytical tools to assess risk • impact for changes in interest rate, fuel costs, growth, transit ridership, PILs • Systematic method to track “options” and recalculate net program costs and other changes in the budget document • Summary of changes made to prior-year approved budget • Clear tracking of the flow between the capital and operating budgets • Reserves as financing source (not a revenue source) • Supplementary schedules on areas of interest to Councillors

7. How does this data helps Councillors? • Focus on macro and micro influences decision-making • Greater scrutiny over budget changes such as “cost to maintain” and “growth” • Better insight and understanding gives greater confidence and ability to achieve a “tighter” budget • Accountability in better focus • Improved risk assessment • Help with priority setting • Communication

8. What is removed from the current operating budget format? • Title and blank pages • Department/branch descriptions • Expenses by nature by branch and program • provided corporate wide and for programs between wages and non wages • Some pie charts on % of department spending by branch and expenditures by type

9. Capital Budget • Strong detail related to new project authority and related financing • What the capital budget does not tell Councillors? • Projected capital fund revenue and expenses for the year (i.e. cash flow) • Reconciliation of change in the capital fund • Projected timing of spending on capital projects • Details on “work in progress” • Total capital programs • new authority plus remaining authority on “works in progress” • Percent authority by category (maintain/growth/strategic) compared with prior years

10. Budget template • Attached illustration of “new look” 2009 budget estimates • Mix of actual and estimated data • Some data left blank or estimated if not readily available • Designed to provide more data of greater relevance to decision making at about one-third the length of the current budget estimate

11. Other budget design issues • What cost centre data do Councillors want and need? • At what level is a forecast meaningful for the operating budget? • What level of detail is needed for capital projects and how should this information be provided? • Hard versus soft costs; timing of expenditures; separate or integrated? • How best to present what is legislated/regulated/controllable? • Distinguishing fixed from variable expenses? • Electronic interactive version of the budget (in full colour)

12. Other unresolved budget issues • Use of a contingency provision in the budget (different from the tax rate stabilization reserve) • Investment in SAP to automate budget compilation • Linking the budgeting system with the financial reporting system (currently difficult to reconcile actual results against budget and reserve funds) • Use of surplus capital funds on closed projects to fund one-time operating projects ($4.6 million in 2008) • Operating expenses in the capital budget

13. Budget Challenge Working Group

14. Budget Challenge Working Group • During the Operational Budget Reviews for Administrative Services, members of the Long Range Financial Planning Committee suggested that the 2009 budget process should include a rigorous budget challenge function • The mid-term governance review may consider budget challenge in the context of a potential Finance and Audit Committee. To this end, the experience gained in 2008 may be instructive • Modeled after the Council Audit Working Group, the Budget Challenge Working Group provides a more systematic and detailed review and analysis of staff estimates. The added scrutiny should liberate Council to limit its time on intricate budget details and more on fiscal planning, priority setting and review of options

15. City of Toronto Budget Committee per Shelley Carroll • Chair is member of Executive Committee - appointed by the Mayor • Seven members (mix of regions, interest, expertise) • Key benefit: Tight, tough, credible budget that ensures that responds to Councillors who want assurance that nothing is hidden. Also an education for committee members on finance • Initial stage of budget is internal staff vetting, which ends with Executive Review and sign off by the Treasurer and City Manager • Budget Committee splits into teams of two for a line-by line review. Also present are GM of division, division financial analyst, CFO-responsible analyst, mayor’s representative and respective Committee Chair. • Meetings held informally (review team has no authority to make changes to the staff budget, although staff carefully consider the observations of those present) • Budget Committee then meets informally to discuss issues before entering a public consultation phase ….. continued

16. City of Toronto Budget Committee per Shelley Carroll • After consultations Budget Committee sends a budget to the Executive Committee (who make few, if any, changes) • Opinion that informal meetings “do not materially advance the decision-making process” since staff members don’t have to accept views of Councillors and there are no resolutions/votes. • Results in effective and efficient process • Budget not approved until March (interim authority provided) • Next steps in the evolution of Toronto budgeting? • Working towards a term of Council budget • Integration of Strategic Branch Reviews into the budget process • A fiscal framework (draft currently in practice)

17. City of Ottawa Budget Challenge Working GroupDesign Issues and Elements • Mandate • Composition • Content • Timeline • Transparency • Methods • Resources

18. Mandate • Ensure the staff budget estimates provides the relevant and reliable data generally required by Councillors to make decisions • Report to Council on whether budget numbers have been sufficiently analyzed, challenged and vetted The Challenge Group has no mandate to make policy decisions affecting the nature and extent of city programs

19. Composition • Members: • Three Councillors to represent Council as a whole: • Council appointment • Councillor as chair • Councillors supported with independent expertise • Three staff • City Manager, Treasurer, Deputy City Manager (rotating)

20. Work Plan: Review draft of operating and capital budget • Key assumptions: • Growth • Inflation (general and specific) • Branch detail • Revenues and expenditures • New operating needs • One time items (new and adjustments from prior year) • Legislative changes • Technology gains • Options proposed on spending reductions and revenue enhancements • as available • FTE changes • Non-departmental, capital formation, common revenues, taxation • Format and presentation of budget

21. Timeline • June/July: Discussion with staff/Councillors on design • July/August: Corporate Services andCouncil review/approval of Working Group design. Members appointed • September: Planning meeting of working group. Review schedule, methods and information required • October: Staff submits working draft of budget with supporting documents/analysis. Working group meets over five days to review and challenge over October 13-24 • November: Working group report to Council coincident with tabling of the budget estimates. Report provides conclusions about the quality of budget data as well as significant observations and disagreements, if any, with staff

22. Methods • Functions like the Council Audit Working Group (no public involvement) • Note-taker (Manager of Financial Planning) • Document review (historical and current) • Staff presentations • Questioning of staff • Review benchmarking and best practice data (e.g. OMBI) • Targeted research (minimal) End