Budget Development Policy

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Type: 
Corporate
Document ID: 
POL-COR-15
Version: 
4.0
Approved By: 
Board of Directors
Date Approved: 
12/11/2014
Date Effective: 
06/15/2017
Date Revised: 
06/15/2017

1.0    RATIONALE

The Ontario Trillium Foundation is accountable for the responsible disbursement of public funds. The goal is to be as prudent as possible, while at the same time enabling the Foundation to operate effectively and efficiently.

2.0    PURPOSE

This policy outlines the principles behind the development of the annual OTF Granting[1], Operating[1], and Services to the Community budgets, in keeping with our value of building trust through transparency and accountability.

3.0    POLICY

Development of OTF’s annual Granting, Operating, and Services to the Community budgets takes into consideration a number of factors and calculations. The budgets are recommended by staff to the Finance & Audit Committee, based on the principles in this document. The Committee then makes recommendations to the Board. Final approval of the budgets rests with the Board. One of the Board’s performance measures for the Foundation is adherence to the ratio of actual operating expenses to total expenditures.

3.1    Granting Budget

a)   Calculating the Overall Budget

The annual Funds Available for Disbursement (“FAD”) is the sum of:

  • The Ministry core allocation for the year
  • Estimated investment income for the year
  • Unspent granting funds from the previous year, both those designated for individual catchments and those that are currently unallocated
  • Estimated rescinded or recovered funds for the upcoming year
  • The difference between the previous year’s forecasted and actual investment income amounts 

The FAD will be allocated as follows:

  • An amount for the Operating Budget (including depreciation), calculated based on 3.2 below
  • An amount for the Services to the Community budget, calculated based on 3.3 below
  • An amount for the Provincial Programs, determined by estimating demand for this stream relative to demand for the other three granting streams[2]
  • An amount for previous year’s unspent granting funds designated for individual catchments which is allocated to such catchments
  • An amount for the estimated rescinded/recovered amounts for the upcoming year, referred to in Step 1, which is allocated based on the actual amounts received during the year 
  • The remaining FAD will be allocated to OTF’s 16 catchments proportionate to their populations, then adjust for rural/urban factors; that is, communities with over 100,000 people (based on the most recent Census) have a 10% reduction in their budget which is redistributed to all the other, smaller, communities on a per capita basis.

b)   Calculating Community Investments budgets for each Granting Cycle

OTF has three granting cycles per year and one stream per cycle:  Seed, Grow, and Capital.

The Board of Directors approves the overall Foundation target ranges (i.e. percentage of Granting budget) for each stream[3], following which the Grant Review Teams (GRTs) set their catchment targets for the three streams based on Board-approved target ranges[4].

c)   Over- and Under-Spending by GRT

Depending on the demand for funds and the quality of applications received, at each cycle’s GRT meeting, al GRT may recommend either more or fewer grants than its budget can accommodate. In such cases, a ‘corridor of materiality’ of over or under 2% of that cycle’s original budget is acceptable, and the remainder of the year’s budget for each affected GRT would be adjusted accordingly. 

GRTs may not spend more than 2% of any cycle’s budget without the approval of the GRT Liaison Committee. In cases of additional deserving initiatives beyond a GRT’s budget capacity, the GRT may recommend these to the GRT Liaison Committee for its consideration should there be  additional funding available from the overall Granting Budget for that cycle.

In the case of underspending of more than 2%, the GRT Liaison Committee will be informed, and will transfer any unspent overall GRT budget amounts to fund high-scoring grants in other catchments as described in the previous paragraph. 

See also 3.4 Unspent Funds, below.

3.2   Operating Budget

The total Operating Budget figure is calculated based on a target ‘operating cost ratio’ – the percentage of total expenditures approved for spending on operating expenses.

The operating cost ratio is approved annually as part of the Business Plan, and actual results are reported to the Board throughout the year, as part of the reporting of Balanced Scorecard achievements against targets.

This figure includes an ‘escalator factor’ – or annual increase – based on 100% of the previous calendar year’s inflation rate (Statistics Canada: Ontario, all items). The resulting number is the total Operating Budget.

Calculation of the Operating Budget is a two-step process:

Step 1   Multiply the FAD for the year by the operating cost ratio.

Step 2   Add to this figure the estimated depreciation for the year.

The resulting number is the total Operating Budget.

Under some circumstances the Finance and Audit Committee and/or the Board may decide that the Operating Budget figure arrived at through the steps above is not appropriate and requires adjustment:

  • If in any year the allocation received from Government represents a significant increase or decrease over the previous year, the target operating cost ratio may be adjusted.
  • If for any other reason the Operating Budget figure is deemed to be inappropriate, it may be adjusted. In a case where a lower figure is approved, the excess funds would normally go into the Granting Budget; and if a higher figure is approved, the additional funds would normally come from the Foundation’s reserves.

3.3   Services to the Community Budget

The annual budget for Services to the Community is calculated based on a percentage of the estimated FAD for the year. This target percentage is approved annually as part of the Business Plan, and normally will not exceed 1.5% of total expenditures.

3.4   Unspent Funds

As stated in 3.1 (c) above, unspent GRT budget funds under the 2% ceiling will be carried over to each catchment’s budget for the following cycle. If a balance of up to 2% more or less remains for any given catchment in the last cycle of the year it will be carried over to the catchment total at the beginning of the following year.

After GRT Liaison Committee recommendations are approved, if there are still funds remaining from the ‘over 2% pot’, those funds would be added into the overall OTF granting budget for the following year.

Any remaining Operating, Services to the Community, or Collective Impact funds unspent during a fiscal year may be transferred to the GRT Granting budget or carried over to the following year’s budget, depending on the circumstances. 

4.0   DEFINITIONS

Services to the Community – Charitable activities other than grants, such as convening, knowledge sharing, capacity building, and technical assistance to community organizations.

Operating Cost Ratio: The percentage of the Foundation’s total expenditures allocated to the Operating Budget (not including depreciation).

5.0   KEY WORDS

Budget; Operating; Granting; Services to the Community; Provincial Programs; Unspent Funds

6.0   AUDIENCES

Staff, Volunteers, Applicant Organizations, Grantees, Partners

 

[1] The policy focuses on the Foundation’s core Granting and Operating budgets which are those related to OTF’s base allocation from Government (i.e. independent of any special granting programs, which have their own individual budgets that are negotiated when an agreement is signed with a Ministry).

[2] Seed, Grow, and Capital.

[3] Current targets – approved Dec. 1, 2016 – are Seed 10-15%, Grow 60-75%, and Capital 15-25%.

[4] Current Board-approved ranges for individual GRTs (also approved Dec. 1, 2016) are: Seed 8-16%, Grow 51-87%, and Capital 10-36%.

 

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