February 14, 2000
TO: Policy & Finance Committee
FROM: Chief Financial Officer & Treasurer
SUBJECT: Financial Control By-law
Purpose:
To present a Financial Control By-law that includes procedures for funds control to replace the Interim Financial Control
By-law.
Financial Implications:
The Financial Control By-law will establish procedures for the payment of accounts and for funds control over
expenditures including the transfer of funding between programs in the operating budget and capital projects in the capital
budget.
Recommendations:
It is recommended that Authority be granted for the introduction of a bill in Council substantially in the form of the draft
by-law attached as Appendix "A" hereto, to confer certain authorities and responsibilities with respect to the commitment
of funds and the payment of accounts.
Background:
Council at its meeting of January 6,1998 adopted By-law 7-1998 to confer certain authorities and responsibilities with the
respect to the appropriation and commitment of funds and the payment of accounts of the City of Toronto and other related
matters on an interim basis. The Interim Financial Control By-law was enacted to establish financial controls during the
period of integration of seven former municipalities into one organization and the unification of a variety of administrative
practices.
Discussion:
The organizational structure for the City has been completed for the management levels in all departments and the process
of standardizing administrative practices is underway. It is therefore appropriate to prepare a new financial control by-law
that recognizes the current organization and provides a framework for managing the operations.
This by-law establishes the framework for the financial controls of the City. It balances the need for stringent financial
controls while allowing Departments the flexibility to react to instances where immediate action is required. Examples of
situations that may require immediate action are emergency situations such as a major flood or snowstorm or the
breakdown of an essential piece of equipment.
The attached by-law has been circulated to all departments for their review and comments. Legal and Audit Services have
reviewed the by-law and their suggested changes have also been incorporated.
Much discussion and review has occurred to determine the proper balance of financial control and operational flexibility.
Department suggestions were considered in making changes to the proposed by-law and incorporated where reasonable.
The Senior Management Team has reviewed this report and concurs with the recommendation.
A review of the financial control by-laws for the regions in the GTA was also undertaken to assist in the development of
the proposed by-law.
The attached by-law was developed in conjunction with staff preparing the Purchasing By-Law to ensure that two by-laws
are consistent and complement each other.
Areas included in this by-law are:
§ Operating Budget -interim operating budget
-spending authority
-commitments
§ Capital Budget -spending authority
-commitments
§ Use of Contingency
The following are the highlights of changes from the Interim Financial Control By-law:
1. The Chief Administrative Officer and Department Heads will be allowed, under the provisions of this by-law, to approve
expenditures in excess of an awarded contract to a maximum of 10% or $500,000. Approval of the appropriate Standing
Committee will be required for amounts in excess of these thresholds. The Chief Administrative Officer may amend the
spending authority of any staff member.
2. Any reallocation of funds between capital projects in excess of $100,000 will require approval of Council before any
transfer from one capital project to another project occurs.
3. A Department Head will be allowed to approve an over-expenditure on a capital project to a maximum of the lesser of
10% or $500,000 over the original approved funding provided that excess funds exist in another capital project to cover the
over-expenditure.
4. The proposed by-law would allow senior City officials to adjust to changing financial situations. In instances where
departmental gross expenditures would exceed the funding approved by Council by more than 2%, prior approval of
Council would be required before such expenditures are incurred.
5. A provision is proposed to allow Department Head or the Purchasing Agent to make purchases in emergency situations.
The Department Head is required to report to the Director of Purchasing & Materials Management of any purchases made
under this provision. This process will allow departments to react quickly to emergency situations and allow the Director of
Purchasing & Materials Management to ensure that proper purchasing procedures are being followed.
This by-law is for city departments and in anticipation that all the Agencies, Boards and Commissions' should adopt a
similar Financial Control By-law, staff will be preparing a generic Financial Control By-law for adoption by each Agency,
Board and Commission.
Conclusion:
The proposed by-law provides senior City officials with the ability to manage their departmental operating and capital
budgets within reasonable limits. The by-law also provides the mechanism for Council to be advised of changes from
approved budget and requires Council approval for certain transfer of funds.
Contact Person and Telephone Number:
A. C. Shultz
Director, Accounting Services
Finance Department
397 5240
Chief Financial Officer & Treasurer
DRAFT BY-LAW
CITY OF TORONTO
BY-LAW No.
To confer certain authorities and responsibilities with respect to the
commitment of funds and the payment of accounts
of the City of Toronto and other related matters.
WHEREAS the Council of the City of Toronto enacted By-law No. 7-1998 to confer certain authorities and responsibilities
with respect to the appropriation and commitment of funds and the payment of accounts of the City of Toronto and other
related matters on an interim basis; and
WHEREAS the organizational structure of the City of Toronto has now been determined and the selection and hiring of
senior employees of executive rank for the City of Toronto has been completed and it is now appropriate for the interim
Financial Control By-law to be repealed; and
WHEREAS Council has sole authority to allocate funds through its adoption of the interim operating budget, the operating
budget and the capital budget for financing approved corporate programs; and
WHEREAS Department Heads have the authority to commit corporate funds for implementing corporate programs subject
to the terms of this by-law, any other financial by-law and there being sufficient funds; and
WHEREAS the Chief Financial Officer & Treasurer is, subject to the terms of this by-law, authorized to pay all accounts
and other liabilities of the City of Toronto.
NOW THEREFORE the Council of the City of Toronto HEREBY ENACTS as follows:
1. Definitions:
In this by-law:
"Account" means a financial liability of the City arising from a commitment and evidenced by any invoice, pay sheet,
receipt or other document indicating payment is due for the goods or services specified in the account;
"Approval of Council" means the funding approval authorized by the adoption of interim or final operating budgets or the
capital budget and includes the approval of a project in a capital budget by the council of one of the former municipalities
prior to amalgamation;
"Capital Project" means an undertaking in respect of which an expenditure is incurred to acquire, improve and maintain
land, buildings, engineering structures, machinery and equipment, including installation of computer software and is the
level at which Council approves funding and funds control in the capital budget;
"Chief Administrative Officer" means the Chief Administrative Officer of the City;
"City" means the City of Toronto;
"Commitment" means a contractual obligation for the purchase of goods, services or construction, including the execution
of any document evidencing the obligation;
"Contingency Fund" means the monies approved in the operating budget to provide for funding of one time expenditures
that were not known or expected at the time the operating budget was approved by Council;
"Council" means the council of the City;
"Department" means an organizational unit of the City headed by a Department Head;
"Department Head" means any of the Commissioners appointed by Council with administrative responsibility for a
Department and includes the City Auditor and any person authorized by Council to act in the place of a Commissioner or
the City Auditor;
"Director" means a person holding the management divisional position of General Manager, Executive Director or Director
within a Department and includes the Fire Chief, Deputy Fire Chief, Medical Officer of Health, Associate Medical Officer
of Health, the City Solicitor and the City Clerk;
"Program" means an organizational unit that may encompass one or more related municipal services, usually a division of a
Department, that is aimed at one or more target groups and is either mission driven or mandate driven and is the level at
which Council approves funding and funds control in the operating budget;
"Purchasing Agent" means the person holding the position of Director of Purchasing and Materials Management in the
Finance Department whose responsibility it is to supervise and carry out the procurement function on behalf of the City and
includes his or her designate;
"Services" further define a Program identified in the annual operating budget;
"Standing Committee" means a standing committee established under the City's Procedural By-law, By-law 23-1998, as
amended, or successor by-law;
"Sub-project" means a level within a Capital Project that a Department Head may wish to use to track expenditures within
the Capital Project;
"Treasurer" means the Chief Financial Officer & Treasurer of the City.
2. Sole Authority
Except as otherwise provided in this by-law, Council has the sole authority for approving funding to operating Programs
and Capital Projects.
3. Purpose
The budgeting, commitment of funds and payment of accounts of the City shall be carried out in accordance with the
provisions of this by-law.
4. Applicability
The provisions of this by-law shall apply to all Departments.
Part I
Budgets
5. Interim Operating Budget
(a) Council shall, before the adoption of the final operating budget for a year, adopt an interim operating budget;
(b) Council, in adopting the interim operating budget, shall determine the sums required for every purpose and the sums
required for the various categories of purposes for the period from the 1st day of January to the date the operating budget for
the next following year is adopted;
(c) The interim operating budget shall be approved by Council prior to the 1st day of January of the year in which the
operating budget will be adopted.
4. Operating Budget
Council, in adopting the total of all sums required during the year for the operating purposes of the City shall, in
accordance with the Municipal Act, determine the operating budget required to provide for the sums required for every
purpose and the sums required for the various categories of purposes.
7. Capital Budget
Council, in adopting the capital budget, shall determine the sums required for each Capital Project listed in the capital
budget and each sum provided therefor shall be a capital account. The Treasurer shall certify that funding for the Capital
Projects in the capital budget is within the City's updated debt and financial obligation limit.
8. Spending Authority - Operating Budget
Operating Budget
(1) (a) The operating budget approved by Council establishes the spending authority for a Program. Department Heads
shall ensure that expenditures do not exceed the approved Program budget.
(b) Spending or funds control is based on the total gross expenditures approved for a Program. Department Heads must
review expenditure levels to address revenue shortfalls. A Department Head may request funds control to be implemented
at a lower level than the Program level.
(c) Department Heads shall report any anticipated over-expenditure to the Treasurer and the appropriate Standing
Committee as soon as such potential over-expenditure is known.
(2) If a Department Head has committed gross expenditures which exceed the funding available in a Program by an amount
not exceeding 2 per cent of the funding for the Program, the Treasurer is authorized to pay such excess, provided that:
(a) this by-law is otherwise complied with; and
(b) the amount of the excess is available from another departmental Program so that the total expenditures by the
Department do not exceed the operating budget approved by Council for the Department.
(3) If there is no excess available from another departmental Program, any expenditure(s) that would result in a Department
exceeding the funding available in a Program by more than 2 per cent requires Council approval prior to a Commitment
being made to incur such expenditure(s), except for purchases made in accordance with subsection 11(6).
(4) The transfer of approved budgets of not more than $500,000.00 in respect of each reallocation between Programs
and/or Services within a Department which do not affect the net operating budget for the Department shall require the
approval of the Treasurer and the Chief Administrative Officer. Any such reallocation shall be reported to Council not later
than the second regular Council meeting following the reallocation. Reallocation of approved budgets in excess of
$500,000.00 require Council approval.
(5) (a) The transfer of approved budgets between Programs and/or Services affecting the net operating budget for a
Department shall require the approval of Council in addition to the approval of the Treasurer and the Chief Administrative
Officer.
(b) Transfers during the year between non-tax supported services, such as water and wastewater, can be made where it is
not contrary to law, only within that Program area and not to other Programs within the Department.
9. Spending Authority - Capital Budget
(1) (a) The capital budget approved by Council establishes the spending authority for a Capital Project. Department Heads
shall ensure that expenditures do not exceed the approved budget(s).
(b) Department Heads shall report any anticipated over-expenditure to the Treasurer and the appropriate Standing
Committee as soon as such potential over-expenditure is known.
(2) (a) A Department Head is authorized to approve expenditures in excess of the awarded contract price for a Capital
Project to a maximum of 10 per cent of the original amount of the awarded contract, provided however that such additional
amount shall not exceed $500,000.00.
(b) Any amendment to an awarded contract which requires expenditures in excess of 10 per cent or $500,000.00 of the
awarded contract amount requires approval of the appropriate Standing Committee prior to the making of a payment for the
expenditure, except for purchases made under subsection 11(6).
(3) (a) A Department Head is authorized to approve additional expenditures where costs for a Capital Project increase to
the extent that they exceed the original funding approval for the Capital Project by the lesser of 10 per cent or $500,000.00,
provided that excess funds are available in another Capital Project to fund the over-expenditure. If costs for a Capital
Project exceed the original funding by more than 10 per cent or $500,000.00 or excess funds are not available in another
Capital Project, Council approval must be obtained before any payment can be made to incur the additional cost, except for
purchases made under subsection 11(6). If subsection 11(6) applies, the approval of the Chief Administrative Officer is
required before any payment may be made for the additional costs and such additional costs shall be reported to Council. If
the additional funding is to be provided through the issuance of debentures, the Treasurer shall certify that such funding is
within the City's updated debt and financial obligation limit.
(b) If prior to the enactment of this by-law, the costs of a Capital Project have exceeded the original funding approved for
the Capital Project, a report to Council shall be prepared by the Treasurer and the Department Head identifying suggested
sources of funding for the over-expenditure. If the additional funding is to be provided through the issuance of debentures,
the Treasurer shall certify that such funding is within the City's updated debt and financial obligation limit.
(4) Except where a Capital Project has been financed through the issuance of debentures, unspent funds in any Capital
Project that is completed shall be applied, subject to the approval of the Treasurer, first against other Capital Projects in the
Department that may be overspent before any reallocation is requested to fund a new Capital Project within the
Department. If there are still excess funds, the Treasurer shall apply such funds to other departmental over-expenditures,
then to other Capital Projects. Such reallocations shall be reported to Council.
(5) Allocations between Sub-projects within a Capital Project and any subsequent reallocations of these funds among other
Sub-projects or the addition of Sub-projects may be made by a Department Head provided that such reallocation does not
exceed the Approval by Council for the Capital Project.
(6) Any reallocation of budget between Capital Projects in an amount of less than $250,000.00 requires approval of the
Treasurer. Any reallocation of budget in excess of $250,000.00 between Capital Projects requires approval of the Treasurer
and subsequent Council approval of the reallocation.
(7) Departments in preparing their annual capital budgets must include in their submissions a cash flow forecast which
indicates the entire capital expenditure for each Capital Project including those Capital Projects approved in previous years.
(8) Any Capital Project approved in a previous year for which a cash flow forecast is not included in a subsequent capital
budget shall be considered to be completed and may be closed by the Treasurer after consultation with the Department
Head. If additional expenditures are expected to occur as a result of litigation or claims, it may not be appropriate to reflect
those expenditures in the capital forecasts. In such cases the Department Head must advise the Treasurer of the possibility
of additional costs to the Capital Project.
(9) The Treasurer, after consultation with the Department Head, shall close any Capital Project that is considered to be
complete and shall submit a report to Council on an annual basis detailing all Capital Projects closed during the year.
Part II
Council Approval
10. Approval
No Commitment shall be made, no debt shall be incurred, no expenditure shall be made and no Account shall be paid by or
on behalf of the City, except with Council approval, in accordance with the provisions of By-law No. and in accordance
with the provisions of this by-law.
Part III
Commitments
11. Spending Authorities
(1) The Chief Administrative Officer may amend the spending authority of any staff member.
(2) The Chief Administrative Officer or a Department Head, or his or her designate, may make a Commitment, not
exceeding $500,000.00 Canadian in any one instance, provided that approved purchasing procedures have been followed in
accordance with the provisions of By-law No. and funds have been provided in the interim operating budget, operating
budget or capital budget. Any such amount shall be inclusive of all taxes and related charges. An amount of up to
$250,000.00 Canadian may be delegated by a Department Head to a Director.
(3) A Director, or his or her designate, may make a Commitment not exceeding $100,000.00 Canadian in any one instance,
provided that approved purchasing procedures have been followed in accordance with the provisions of By-law No. and
funds have been provided in the operating or capital budgets. Any such amount shall be inclusive of all taxes and related
charges.
(4) A Commitment in excess of $500,000.00 Canadian requires Bid Committee, Standing Committee or Council approval
in accordance with the provisions of By-law No. before expenditures may be made.
(5) The Chief Administrative Officer or a Department Head may authorize an additional expenditure on a Commitment
authorized in accordance with this by-law of up to 10 per cent of the Commitment, subject to the limits set in subsections
(2) and (3) above, provided that Council has:
(a) provided funds in the operating or capital budget for that purpose, or
(b) approved the Project and the funding therefor, and
(c) sufficient funds remain in the Project.
(6) When an event occurs that is determined by the Chief Administrative Officer or a Department Head to be a threat to
public health, the maintenance of essential City services, the welfare of persons or of public property, the security of the
City's interest or financial liabilities arising from environmental conditions and the occurrence requires the immediate
delivery of goods or services and time does not permit the Department Head to allow the Purchasing Agent to acquire such
goods and services, the Department Head may make such purchases without the involvement of the Purchasing Agent. The
Department Head shall advise the Purchasing Agent and the Chief Administrative Officer of such purchases and report
such purchases to Council or the appropriate Standing Committee in accordance with the provisions of By-law No. .
(7) Expenditures in excess of approved funds require Council approval, except as otherwise provided for in this by-law.
12. Petty Cash
(1) There may be established in a Department petty cash funds in amounts, following policy and procedures, which have
been approved by the Treasurer having regard to the operational requirements of the Department.
(2) The Treasurer is authorized to reimburse a petty cash fund upon delivery of original receipts and such other
documentation as the Treasurer may require from time to time.
(3) Petty cash payments for any individual purchase shall not exceed $200.00.
13. Deposits with Treasurer
Duly executed copies of all agreements, including all insurance and certificates thereof, all contracts, bonds, letters of
credit and other security for the due performance thereof; and all other documents executed by or on behalf of the City
shall be delivered to the Treasurer for safekeeping.
Part IV
Treasurer's Authority
14. Authority
Despite any other provision in this by-law, the Treasurer is authorized to pay the following Accounts provided that funds
are available in the operating budget or a Capital Project for that purpose:
(a) all salaries, wages and benefits due to any person in the employ of the City;
(b) all retiring allowances and mandatory sick pay grants due to any person previously in the employ of the City;
(c) all accounts for telephones, postage and utilities supplied to the City;
(d) all accounts for fees and levies payable to the federal, provincial or other municipal government, or to any agency,
board or commission thereof;
(e) all accounts for payments of principal or interest on debentures, loans or overdrafts, including foreign exchange;
(f) all accounts for payments to the school boards of amounts raised for them by tax levy;
(g) all accounts for advances to Agencies, Boards and Commissions on account of the operating budget therefor authorized
by Council for their purposes;
(h) all accounts for advance to the Toronto Transit Commission or the school boards on account of capital works, pending
the issuance of debentures where all necessary authorizations of such capital works have been received, such advances to
be made after receipt of a written request;
(i) all accounts relating to employee pension deductions and employer pension contributions in respect of the salaries and
wages to those persons who are paid by or employed by the City, and which are payable in respect of any duly authorized
registered pension plan on behalf of the respective employee; and
(j) all accounts for the costs of repairs to City roads certified by the Commissioner of Works and Emergency Services
provided that the cost is recoverable from a public utility corporation or a corporation carrying out a public utility function.
Part V
Reserves and Reserve Funds
15. Reserve and Reserve Funds
The administration of reserves and reserve funds is contained in By-law No. .
Part VI
Contingency Funds
16. Contingency
(1) (a) Expenditures from contingency may only be made for one-time non-recurring costs that were not identified at the
time the operating budget was approved.
(b) Contingency Funds shall not be used for over-expenditures by Departments.
(2) Approval must be obtained from the Treasurer for any use of Contingency Funds for any purpose. The Treasurer shall
report to Council requesting approval for such use.
Part VII
Authority for Write Offs
17. Authority
The Treasurer is authorized to write off outstanding amounts owing to the City as uncollectible, provided that any such
amount does not exceed $10,000.00 and is not an amount raised as taxation or deemed to be taxes, except for items added
to the tax bills for collection purposes only and not as a result of a tax or assessment appeal. Write offs of amounts owing
to the City in excess of $10,000.00 must be approved by Council except for tax reductions as a result of a successful appeal
of assessment or taxes by a taxpayer.
Part VIII
Administration
18. Departmental Signing Authorities
(1) The Chief Administrative Officer and each Department Head shall formulate and maintain a current schedule
specifying the delegation of financial signing authority within their Department, including Commitment and payment
authorities and the authority levels for each level of management within the Department.
(2) The schedule shall be signed by the Chief Administrative Officer or Department Head respectively and a copy of the
schedule, and specimen signatures of the relevant officers and staff of the Department, shall be forwarded to the Treasurer
at least annually.
Part IX
Title
2. The short title of this by-law is the Financial Control By-law.
Part X
Repeal
3. By-law No. 7-1998, a by-law "To confer certain authorities and responsibilities with respect to the appropriation and
commitment of funds and the payment of accounts of the City of Toronto and other related matters on an interim basis" is
repealed.
ENACTED AND PASSED this day , A.D. 2000.
Mayor City Clerk
