April 2018 Board Meeting - Reserves and Reserve Funds Resolution

Issue

Constrained financial resources coupled with late funding approvals from the Ministry of Health and Long-Term Care limits the ability of the Windsor-Essex County Health Unit to address public health needs within the Community of Windsor and Essex County.

Background

The Windsor-Essex County Health Unit (“WECHU”) is a publicly funded organization.  As such the WECHU has a responsibility to spend funds prudently and with the objective of providing public health programs and services as required under the Health Protection and Promotion Act, R.S.O. 1990 (“HPPA”) and the Ontario Public Health Standards:  Requirements for Programs, Services, and Accountability (“OPHS”). 

The WECHU is funded through grants from the Province of Ontario, more specifically the Ministries of Health and Long-Term Care (“MOHLTC”) and the Children and Youth Services (“MCYS”) (collectively referred to as “Ministries”).  As well it is funded through required contributions from the Corporation of the City of Windsor (“City”), the Corporation of the County of Essex (“County”) and the Corporation of the Township of Pelee (“Pelee”) (collectively referred to as “the Obligated Municipalities”). 

Programs funded by the Ministries through grants can be categorized as follows:

• Public Health and Health Promotion Mandatory Programs funded to a maximum of 75% by the MOHLTC;
• Public Health Mandatory Programs funded at a rate of 100% by the MOHLTC;
• Health Promotion Programs funded at a rate of 100% by the Ministries
• Public Health and Health Promotion one-time funding business cases funded by the MOHLTC;
• Health Capital one-time funding business cases (historically funded at a rate of 100% but depends on the nature of the request) funded by the MOHLTC.

The budget for the Public Health and Health Promotion Mandatory Programs funded to a maximum of 75%, commonly referred to as the Cost Shared Program, is presented to the Board of Health for the Windsor-Essex County Health Unit in the November to January timeframe annually.  That budget forms the basis of the Annual Service Plan and Budget Submission to the MOHLTC. Approval of the Annual Service Plan and Budget Submission by the MOHLTC has historically been in the 4th quarter of the WECHU’s fiscal year (January 1 to December 31).  For example, the Cost Shared Program budget for the 2017 fiscal year was approved in December of 2016.  MOHLTC funding approvals were received mid-November 2017.

The delay in the approval process creates a number of challenges for the WECHU:

1. Overspending – The delay in the approval process puts the WECHU at risk of overspending.  This circumstance can arise if the budget submission assumes an increase in MOHLTC funding that is subject to approval historically at a later date.  In this circumstance, the Obligated Municipalities would be required to fund a deficit that may arise from operationalizing the approved Cost Shared Budget.  This obligation is set out in the HPPA, in the following provision:
   Payment by obligated municipalities
   72 (6) Where additional expenses incurred
   If, after a notice is given by a board of health under subsection (5) in a respect of a year, additional expenses referred to in subsection (1) that were not anticipated at the time the notice was given are incurred during the year, the board of health may give another written notice to each obligated municipality in the health unit, specifying the additional amount for which the obligated municipality is responsible under this section and the time at which the addition amount must be paid.
2. Underspending – This is the inability of WECHU to spend funding received from the Ministries and Obligated Municipalities. The following scenarios help articulate this challenge:
   
   1. Mandatory Programs – Human Resource Information System (“HRIS”):  The 2017 budget submission included a one-time business case to support WECHU acquiring and implementing a HRIS.  As approval of this business case was not received until mid-November of 2017, WECHU Administration was not able to embark upon the necessary activities to acquire and successfully implement the HRIS by March 31, 2018.  This funding will be returned to the MOHLTC.  A one-time business case for an HRIS was submitted to the MOHLTC with the 2018 Annual Service Plan and budget submission.
   2. Assumed increase in funding from the MOHLTC:   In recent history, the WECHU has integrated an assumed percentage increase in base funding from the MOHLTC.  Recognizing that the Obligated Municipalities bear financial risk in the event that the budgeted augment in funding is not approved, the WECHU proceeds cautiously during the fiscal year monitoring budget variances and identifying other operating efficiencies to ensure the budget is not overspent.  Administration recognizes and does its best to balance what is required of the WECHU under the HPPA with the fact that we operate using finite financial resources funded by the Community of Windsor-Essex County that we serve. 
3. Re-prioritization of resources to address emerging public health needs – In 2017 in response to increasing opioid-related deaths in Windsor and Essex County as well as the Province of Ontario, WECHU reassigned already constrained resources to help support the development of a local opioid strategy.  In early 2017, the WECHU made certain decisions to defer activities associated with other public health needs to address this emergent issue.   The MOHLTC announced additional funding to support this initiative in June of 2017.

The above represent a few examples of the challenges faced by the WECHU associated with late funding approvals from the MOHLTC.  Like the other 36 public health units within Ontario we have expressed our concerns to the MOHLTC regarding late funding approvals.  We have made appeals to the MOHLTC for certain one-time 100% funded business cases to be extended to allow us the opportunity to establish these initiatives and expend funding.  In two instances in recent years we have been successful.  But this success likely represents a lost opportunity in future periods to redirect those funding asks and efforts to other public health needs.

Reserves and reserve funds

Reserve and reserve funds have historically been used by public sector entities to ensure that adequate financial resources exist to fund specific initiatives and/or circumstances that arise that were unforeseen in the current year’s budget.   Contributions to and utilization of reserves and reserve funds typically follow a prescribed methodology in accordance with an Organization’s Corporate By-Laws or approved policy. The Province of Ontario does not permit Public Health Units to contribute unspent grant funding into a reserve fund.  The following section within the 2014 Accountability Agreement dated January 1st, 2014, address this matter:

15.5 Carry Over of Grant Not Permitted.  The Board of Health is not permitted to carry over the Grant from one calendar year to the next, unless pre-authorized in writing by the Province.

Therefore, reserves or reserve funds held by a public health unit would need to be established through contributions from Obligated Municipalities or other funding sources.

The WECHU currently has the following reserve funds.  These reserve funds were not established using contributions from the Obligated Municipalities.  They have specified purposes for which funding can be utilized.

Employee future benefits fund:  This reserve fund was established as a result of the demutualization of Mutual Life to help defray the future employee benefit costs incurred by the WECHU.  At December 31, 2016, the balance of this reserve fund was $180,929.

Septic fund:  The Septic reserve fund was established from the Ministry of Environment for septic inspection services and have been retained in a reserve fund to help defray costs associated with septic inspection services.  At December 31, 2016, the balance of this reserve fund was $43,365.

The WECHU did an informal survey of 36 other public health units in Ontario to understand whether they do/do not have reserve funds and if so, are those reserve funds supported by policy.

Public Health Units that responded indicated that they either held reserves directly or that reserves were administered by their respective municipalities.  Furthermore, respondents indicated that reserves were supported by policy and or guidelines as established by corporate bylaws.  Certain of these Organizations have shared those policies with the WECHU and will serve as good resources to support our own policy development if directed by the Board to do so.

With a proper policy and reporting structure, the reserve fund mechanism funded through contributions from the Obligated Municipalities could provide the necessary resources to address the challenges identified above.  More specifically:

• Reserve funds could assist in mitigating financial risk in future periods to the Obligated Municipalities in instances where the WECHU has overspent.
• Reserve funds could serve to provide cash flow for implementation of 100% funded business cases in advance of MOHLTC approvals thus ensuring that funding approvals will be spent irrespective of the timing of those approvals.  Cash flows would then be returned to the reserve fund for future uses.
• Reserve funds could serve to provide cash flow for emergent public health needs rather than re-prioritizing or deferring other public health activities.

Proposed Motion

Whereas the Windsor-Essex County Health Unit is funded through grants from the Province of Ontario and required contributions from the Obligated Municipalities, and

Whereas the Province of Ontario does not permit for unspent grants to be carried forward to the next fiscal year irrespective of the timing of approvals, and

Whereas the Windsor-Essex County Health Unit presently does not have reserves and reserve funds that could be drawn upon to address the challenges associated with late funding approvals from the Province of Ontario as well as emergent public health needs, and

Now therefore be it resolved that the Windsor-Essex County Board of Health direct Administration to send an appeal to the Province of Ontario requesting that they consider revisiting the timelines for approval of grants to public health units as approvals in recent years have hindered public health units to implement public health initiatives with approved funds.  In addition, the appeal should request for the Province of Ontario to revisit its position on contribution of unspent grant funding into a reserve, recognizing that the Province of Ontario would need to provide appropriate policy and reporting structure over such reserve funds.

FURTHER THAT the Board direct Administration to write a report, including a proposed policy and reporting framework, and present their request for the establishment of Reserves and Reserve Funds to the Administrations of the Obligated Municipalities for feedback and support, and

FURTHER THAT the Board direct Administration to present a report to the Councils of the Obligated Municipalities for the establishment of Reserves and Reserve Funds for their consideration and approval.