Budget process

Refer to Budget meeting in Meetings section for NSBA requirements on budget meetings.

The ministry will supply an excel workbook to all LSBs to facilitate the completion of the estimates (budget) along with an instruction booklet on how to input information into the workbook. This workbook will be used to submit the budget. The excel workbook will also be used as the request for advances from the grant allocation.

Refer to the sections Eligible or ineligible expenses by power and Eligible and ineligible revenues for information on eligible revenues and expenses.

All LSBs are required to submit estimates (an operating budget) to the ministry each LSB fiscal year.

The secretary must upload the estimates (budget) of the board accompanied by the by-law adopting the estimates to the Transfer Payment Ontario tool before December 10. If LSBs have digital challenges or capabilities, it can contact ministry staff to explore other options.

The LSB is required to pass a by-law to authorize the Ministry of Finance to collect the levies (or fees) on behalf of the LSB and include the approved rates by property (Methodology 3) for the current fiscal year. It is not to include the grand total in the by-laws.

The LSB must also pass a by-law adopting the annual estimates and provide to the ministry.

Since the yearly tax roll is only sent out after the fact, and OPTA is only open subsequent to the tax roll release, the LSB will:

  • make data or information entries in OPTA in January or February
  • obtain from the OPTA summary table the total amount of PLT to be collected – generated by the system
  • forward an email to the Ministry of Finance confirming the total amount (must match the amount on OPTA) to be collected on behalf of the LSB by no later than the date provided by MOF (contact ministry staff or MOF staff name)

Levy and fees

Where in the exercise of its powers, a LSB provides a service; LSBs have the authority to charge a levy or a fee to inhabitants in order to raise sufficient funds for its purposes.

The amount charged, the purpose for which it is charged, and the area where it will be charged is determined when the LSB is structuring its estimates (budgets) for the coming year. Please note any levy to be added or changed must be approved through a vote of the inhabitants during a public meeting. The board could, but is not required, to put any proposed fee to be added or changed to a vote of the inhabitants. In either case, the annual budget is voted on by the board after discussion with the inhabitants.

The NSBA, subsection 7(2)(b) states that an LSB can only charge a levy or a fee where the LSB delivers a service in the exercise of its powers.

A LSB cannot charge a levy or a fee in any part of the board area where the service is not being provided (NSBA, subsection 7(2)).

This needs to be taken into consideration when developing the estimates (budget) for the LSB.

What this means is where the LSB is not providing the service to a particular inhabitant (for example: by providing different services or levels of services to different parts of the board area), then the levy or fee cannot be charged. Where the board provides a service to an inhabitant, but the inhabitant chooses not to access that service, the levy or fee still applies to that inhabitant.

A LSB cannot apply a levy or a fee to a vacant property unless that property is receiving a service. Vacant land would not benefit from certain services and therefore cannot be charged a levy or a fee for them.

Method of collection for levy or fees

LSBs have 2 options available to them for the collection of levy or fees.

Direct billing

Direct billing allows the LSB to conduct its own billing. This includes producing the bills, mailing them to their ratepayers and collecting payment. By opting for direct billing, boards are entering a labour-intensive process that requires them to wait to receive payment from ratepayers and leaves them with the responsibility to collect any arrears owing to the LSB. This could present financial challenges for a LSB if it does not receive all the levies or fees charged.

PLT consolidated billing

PLT consolidated billing offers boards the opportunity to opt-in to a consolidated PLT that will include the Provincial Land Tax, Education Property Tax, Local Roads Board Tax and local service board levy or fees. Billing will be done by the Ministry of Finance thus eliminating the need for LSBs to bill the ratepayers directly. The consolidated billing option also means the LSB will receive the amounts billed as opposed to collected. Because boards are being paid amounts billed instead of collected, arrears collected by the Ministry of Finance will not be passed on to the LSB. LSBs are encouraged to consider this option for collecting their levy or fees as it removes the billing and collection process from the LSB.

If LSBs do not opt-in to the system in a given year, the Ministry of Finance will not collect arrears resulting from that given year, in future years. In other words, Ministry of Finance will only collect arrears for years that the LSB opted-into the system.

Allowable use for levies or fees collected

Levies or fees are collected to assist in paying the costs associated with the delivery of services in the exercise of the board’s powers.

Levies or fees can only be used for the delivery of services in accordance with a board’s approved powers.

Any other use is prohibited.

Using the Provincial Land Tax billing method

In order to assist LSBs in calculating its levy or fee, the Ministry of Finance has made available to all LSBs a tool to assist with that process. The tool named Online Property Tax Analysis (OPTA) enables LSBs to develop scenarios for determining a method to collect as well as amounts that would be charged to inhabitants.

OPTA has 3 methods of collection available to LSBs.

Method 1

Used when the LSB wants to charge the same amount of fee for every property. This method divides the total revenue to be collected equally to all properties in the LSB area.

Method 2

Provides some flexibility for the LSB to charge different fees for the same service for year-round, seasonal or vacant properties. If the LSB uses Method 2 and charges the same fee for all types of properties, the result would be the same as Method 1.

Method 3

The LSB can levy a tax based on a property’s value. The LSB tax is calculated by multiplying the tax rate by the assessed value of the property.

Note: if an LSB decides to change methods (such as change from a fee to a levy), the Ministry of Finance should be informed as soon as possible so that they may prescribe a tax ratio for the LSB through regulation.

In order to use the PLT system to collect a levy or a fee, the LSB is required to provide the Ministry of Finance with a by-law authorizing the Ministry of Finance to bill and collect on the LSBs behalf before December 31 of the previous year.

The by-law should contain the following:

  • name of LSB
  • total amount to be collected
  • the year in which it applies
  • method of calculation (which of the 3 options will the LSB choose)
  • example: The LSB of XXXX authorizes the Ministry of Finance to collect levy or fee calculated using Methodology (1 or 2) in the OPTA system, on their behalf for a total amount of $XX.XX . Dated, signed, and sealed by the LSB

In keeping with the dates in the NSBA, section 23 for the finalizing of estimates, the LSB should submit its by-law to the Ministry of Finance no later than December 10.

Ministry grant program payment process

Not all LSBs receive grant funding to offset costs of operations. The ministry operating grant was established when the LSBs were created based on services they were providing. There is no guarantee that funding would be available to newly established LSBs.

LSB to refer to the funding agreement for specific requirements for the given year.

Revenues and expenses

For the purposes of determining whether a LSB meets the criteria for the ministry grant, revenues and expenses are broken down into both eligible and ineligible categories.

Only eligible items can be considered when determining whether an LSB has met the requirements to receive the operating grant.

Eligible revenues

Revenues considered eligible for operating grant purposes, must be derived from the community, from items such as:

  • net proceeds of community fund raising events
  • user fees
  • levy imposed under the Provincial Land Tax

Ineligible revenues

Revenues considered ineligible for operating grant purposes, include the following:

  • in kind donations, such as voluntary labour or materials
  • proceeds from the sale of assets
  • rental of facilities other than on a per event basis, that takes away from community use
  • grants or monies received from government sources, and interest earned on those funds including the ministry’s annual LSB operating grant
  • bequests and legacies
  • while other revenues or in-kind contributions can be considered eligible for capital projects, they are not eligible for operating purposes

Eligible expenses

Eligible expenses are those costs incurred in the day-to-day operation and maintenance of approved services for which the LSB has powers.

In general, expenses consist of those items where the benefits are realized during the year which the cost is incurred.

Repairs and maintenance

Repairs, replacement parts or restoration of units, plants, buildings, in order to return to normal working efficiency or to extend the useful life of the asset. Does not include the replacement or renewals that alter the original use of the asset (improvement of the asset) these would be considered as a capital expenditure.

Maintenance means the cost of keeping a property or asset (equipment) in efficient working condition. Enhancements that go beyond maintenance and add value would be considered a capital expense.

Repairs and maintenance will be allowed as eligible operating expenses provided its related to its approved powers, within the estimated budget allocation, within a financial plan to support the expense or both.

A detailed breakdown of this budget item may be requested by the ministry if clarification is needed.

Fixed assets

The ministry’s grant program will not fund the purchase or lease of fixed assets, other than as listed below:

  • capital leases may be considered an eligible expense, in extraordinary circumstances, with the prior written approval of the ministry
  • the ministry may disallow any planned expenses which are either beyond the scope of the LSB program or is considered inconsistent with the LSB program objectives

Acquisition of land

The NSBA, section 8 allows for a board to acquire land in the situation where that land is necessary in the exercise of its powers (delivery of services), such as:

  • land can be acquired by purchase or lease
  • land no longer of use to the board can be disposed of
  • any planned acquisitions should be part of the annual budget process

Disposition of assets (including land)

Where any government funding was received to purchase assets, the LSB should review their funding agreement associated to that funding to ensure they are in compliance with the disposal requirements.

Although not a requirement of the NSBA, to ensure a transparent process is used in the disposition of an asset or land, it is recommended that the LSB board adopt a policy on the process to be followed when disposing of the asset or land. Items to consider when developing a policy:

  • where the asset is useful (such as surplus fire equipment) LSBs may want to consider requesting bids be submitted
  • similar to a procurement policy, determine a method to dispose of assets based on their value at the time of disposition such as advertise for sale or request bids

Eligible, ineligible expenses by power

The following section describe eligible and ineligible expenses for each LSB Power and LSB administration costs.

LSB administration

Eligible expenses

  • Utilities (heat, electricity, telephone, internet, water, sewer).
  • Insurance (including the security bond for the secretary).
  • Office expenses (office supplies including photocopying, advertising, newsletter, IT costs).
  • Honorarium paid to secretary.
  • Rental costs associated with LSB board office or meeting room.
  • Audit expenses for preparation of audit for all board operations.
  • Bank charges (service charges and interest costs on temporary borrowing where borrowing does not contravene NSBA, section 28.
  • Legal fees incurred in the collection of revenues or other board administration matters.
  • Dues, fees and permits relating to the delivery of approved powers (services).
  • Repairs and maintenance (refer to Repairs and maintenance section for eligible expenditures).
  • Mileage costs incurred for LSB administration purposes only.

Ineligible expenses

  • Legal fees for the purchase or sale of property.
  • Write off of bad debts (uncollectible fees and levies).
  • Unless a donation is accounted for in the budgeting process and fits within the LSBs delivery of basic services, donations should be deemed ineligible. These donations would come from inhabitant fees or levies and should not be donated without public consultation and budgeting process.

Fire protection

Eligible expenses

  • Utilities (heat, electricity, telephone, internet, water, and sewer).
  • Communications (operation of a call system, lease of pagers).
  • Insurance (community owned vehicles, fire hall, liability insurance where required).
  • Office supplies.
  • Training and firefighting supplies, consumable within the current year (can include video tapes, membership fees, subscription related to the service and mutual aid dues).
  • Repairs and maintenance of vehicles (fuel, oil, license fees, repairs on community owned vehicles.
  • Repairs and maintenance for all community owned fire equipment.
  • Repairs and maintenance of property (includes repairs and maintenance of the fire hall as well as snow removal costs).

Where the LSB contracts to an independent fire department for fire protection services, the cost of that contract is considered eligible. LSBs are responsible for ensuring that the contract complies with the NSBA.

Ineligible expenses

  • Capital purchases and related expenses other than minor assets.
  • Honorariums paid to volunteer Fire Fighters, Fire Chief, or any other individual other than the LSB secretary.

Recreation

Services considered as recreational include:

  • community hall
  • parks
  • playgrounds
  • ice rink
  • beach
  • curling rink (if not privately owned)
  • swimming pool
  • playing fields
  • community docks or wharf
  • seasonal campgrounds or vacant land used to rent out to campers

Eligible expenses

  • Heat, electricity, telephone, internet, water, sewer.
  • Insurance (including liability) on recreational facilities.
  • Office and recreational supplies.
  • Repairs and maintenance of equipment or property (includes snow removal and up keeping of landscaping).
  • Programs as defined by the Ministry of Heritage, Sport, Tourism and Culture Industries.

Where the LSB contracts to an independent provider for recreation services, the cost of that contract is considered eligible.

Ineligible expenses

  • Fundraising expenses.
  • Capital purchases and related expenses that are not part of the annual budget process.

Water supply

Eligible expenses

  • Heat, electricity, telephone, internet, water, sewer.
  • Insurance.
  • Materials and supplies (chemicals and materials needed in the day-to-day operation of the water system, office supplies).
  • Repairs and maintenance of the system (distribution system).
  • Repairs and maintenance of the property (building repairs and maintenance, snow removal).

Where the LSB contracts to an independent provider for water supply or to an operator for its water distribution system, the cost of that contract would be considered an eligible expense.

Ineligible expenses

  • Capital purchases and related expenses that are not part of the annual budget process.
  • Direct financial assistance to owners of private systems is not considered an eligible expense.

Sewage

Eligible expenses

  • Heat, electricity, telephone, internet, water, sewer.
  • Insurance.
  • Repairs and maintenance of equipment (equipment necessary to provide the service only).
  • Repairs and maintenance of the collection or disposal system.
  • Repairs and maintenance of property.
  • Where the LSB contracts to an independent contractor or company for the collection and disposal of sewage as per the Ministry of the Environment, Conservation and Parks Regulations, those costs would be considered as an eligible expense.

Ineligible expenses

  • Capital purchases and related expenses that are not part of the annual budget process.
  • Direct financial assistance to owners of private systems is not considered an eligible expense.

Garbage collection

Eligible expenses

  • Insurance.
  • Repairs and maintenance of equipment.
  • Repairs and operating cost of a garbage truck.
  • Where the LSB contracts to an independent contractor for the collection, removal and disposal of garbage, those costs would be considered as an eligible expense. All 3 services have to be provided if these services are contracted out.
  • Costs associated with the operation of a transfer station for the collection of garbage as long as the LSB contracts for the disposal of the garbage by an independent contractor.

Ineligible expenses

  • Costs associated with the operation of a landfill site or the disposal of garbage by the LSB would not be considered as eligible as a LSB is not authorized under the power of Garbage to carry out these activities.
  • Capital purchases and related expenses that are not part of the annual budget process.

Street or area lighting

Eligible expenses

  • Electricity.
  • Repairs and maintenance of equipment.
  • Contracted services.

Ineligible expenses

  • Capital purchases and related expenses that are not part of the annual budget process.

Roads

Eligible expenses

  • Contracted services (road maintenance, includes administration costs).
  • Insurance (third party liability).
  • Office expenses (supplies, telephone).
  • Summer maintenance
    • dragging or grading
    • patching or mulch
    • dust laying
    • rock work
    • brush work
    • ditching
    • beaver dams
    • signs (that meet MTO requirements)
    • drainage or clearing
    • gravelling
    • roads patrol
    • line painting
    • culvert repairs
    • pothole repairs on surface treated or paved roads
  • Winter maintenance
    • snow clearing, plowing and removal
    • snow ditching or draining control
    • ice blading
    • sanding
    • salting
    • culvert thawing
  • Construction
    • gravelling
    • pit run gravel
    • crushed gravel
    • surface treatment
    • road rehabilitation or realignments
    • bridges and culvert replacement
    • road reconstruction
    • new signs
  • Other minor asset items.

If LSBs have issues with local roads, it should work with the local roads board in the area to address any concerns.

Ineligible expenses

  • Sidewalks, new roads or entrances.
  • Street or area lighting (the LSB would need that power for costs associated with it).
  • Any work performed on roads that are not part of the LSB roads system.
  • Capital purchases and related expenses.

Public library service

Eligible expenses or costs

  • Operating costs (all costs that are reasonable and that are related to providing public library service).
  • Minor assets.

Ineligible expenses

  • Capital purchases and related expenses that are not part of the annual budget process.

Emergency telecommunications

Eligible expenses or costs

  • 911 dispatch services.

Bookkeeping and recordkeeping

Financial tracking

LSBs are encouraged to consult an accounting professional regarding the most effective bookkeeping system or process to use.

The following items should be taken into consideration in developing a bookkeeping process:

  • must reflect Generally Accepted Accounting Principles (GAAP)
  • should be set up in such a fashion to ensure easy transfer of information from the bookkeeping system to the financial reporting forms (excel budget document, that is submitted to the ministry)
  • either a manual or automated bookkeeping system is acceptable

Accounting method

The LSB can make their own decision on what method of accounting it will use. The accrual method is probably more accurate. The accounting system (cash or accrual) doesn’t prevent the auditor from preparing the year-end statements on the accrual basis.

The ministry encourages LSBs to consult with an accounting professional prior to making this decision.

Recordkeeping

Records retention

All LSBs should adopt a by-law that clearly outlines their records retention policy. Where concern exists on the amount of time to retain records, the LSBs should consult their legal counsel for assistance.

The ministry recommends that LSBs should, at the minimum, adopt a by-law establishing the following ground rules for records retention:

  • Recommended that financial records be maintained for a minimum of 7 years (consistent with Canada Revenue Agency).
  • Where financial records are specific to a government program (funding program), such as the Northern Ontario Heritage Fund Corporation (NOHFC), the records would be retained based on the conditions set out in the Funding Agreement.
  • Records should be filed in at least the following 5 categories and maintained as follows:
  1. Minutes of meeting – these records serve as the history of the organization and it is recommended that they be kept on file indefinitely or for the lifespan of the LSB plus an additional 7 years, in the event they need to be referenced at some later date.
  2. By-laws – these records should be numbered and filed in order. When a by-law is changed or revoked, a notation should be placed on the original by-law, and it should reference the by-law that effected the change. These should be maintained for the lifespan of the LSB, plus an additional 7 years.
  3. Correspondence – maintained for a minimum of 7 years.
  4. Financial records – maintained for a minimum of 7 years.
  5. Legal documents – retention of these would be determined by what the document is for, but at the least 7 years.

Any key documentation as it relates to the NSBA requirements (such as varying powers) is required to be kept for the lifespan of the LSB.

With the use of TPON, it is recommended that records also be maintained outside of TPON for future reference.

Audit requirements

There are 2 provisions in the NSBA for financial audits:

  • subsection 29(1) requires that an audit be performed by a public accountant on an annual basis or more often as the board requires
  • subsection 29(5) states that the minister may, at any time, cause the accounts and transactions of a board to be audited

Copy to the ministry

The secretary must send a copy of the annual audit report to the minister (NSBA, subsection 29(3)).

Delivery of the annual audit to ministry staff would satisfy this requirement. This is also required as part of the interim reporting to the ministry.

Examination of audit report

The board must conduct sufficient meetings to allow inhabitants to participate in a discussion of the annual audit report (NSBA, subsection 16(c)).

The secretary must permit any inhabitant at any reasonable time, to examine and copy the audit report. Where an inhabitant makes a request to view or copy the audit report, then the secretary should endeavour to make the audit available within a reasonable and mutually agreed upon time (NSBA, subsection 29(4)). This could also include sending it digitally.