Financial management policy

The co-op’s board of directors are the members’ elected officers, charged with the responsibility of effectively and efficiently managing all the co-op’s assets. This policy describes the co-op’s guidelines for budget preparation, spending control, reserve funds and investments.

The Finance Committee advises the board on financial matters, and assists the board in fulfilling its financial responsibilities. The Finance Committee consists of the board Treasurer and a volunteer group of co-op members (minimum 2) who are appointed by the board. The Finance Committee will meet as they have need.

ROLE OF THE FINANCE COMMITTEE

  • Oversee the co-op’s bookkeeping, accounting and cash management systems.
  • Review the co-op’s financial position prior to the monthly meeting of the board of directors.
  • Develop and monitor investment policies and performance for the co-op.
  • Prepare the co-op’s annual operating budget; prepare a capital budget when needed
  • Ensure that the co-op complies with any funding agency’s reporting requirements
  • At each member meeting, report on the co-op’s financial position vis-à-vis the annual budget.
  • Review the co-op’s insurance coverage annually; advise the board of directors if any changes are necessary.
  • Ensure and oversee the annual audit of co-op accounts; make a special presentation to members at the annual general meeting.
  • Recommend an auditor annually, for approval by members at the annual general meeting.

 

A. BUDGET PREPARATION

A.1. ANNUAL OPERATING BUDGET

a. The board of directors will annually approve an operating budget for the next fiscal year, in accordance with Article 4.1 of the co-op’s Occupancy Rules. The co-op’s fiscal year runs from 1 January to 31 December.

b. As a policy decision, the board of directors has determined that the co-op’s monthly housing charges will not exceed the Manitoba Housing Affordable Housing Rental Program Rents. These rents are based on median market rents for similar-sized units in the City of Winnipeg and are adjusted annually by Manitoba Housing. The new rates are usually available by October of each year.

c. The Finance Committee will develop an operating budget for the next fiscal year which incorporates the housing charges anticipated for the next year. This budget will be reviewed by the board of directors at their June meeting.

d. Before the end of September, the board of directors will hold a general informational meeting in order for members to consider and discuss the proposed operating budget. The operating budget must include:

  • all sources of revenue
  • the total expected cost of operating the co-op, including contributions to the replacement reserve fund, and maintenance of other reserve funds (see Member Share Assistance Policy)
  • a breakdown of the total cost into separate categories of expenditure
  • sufficiently detailed notes on each category to allow meaningful discussion by members.
  • the full monthly housing charges proposed for each suite, or size of suite.
  • the charges proposed for services provided to members and charged separately, such as parking, laundry, internet access, guestroom rental, etc.

e. At the general informational meeting, members have the right to question the proposed budget and suggest changes in spending priorities. These changes should be incorporated by the board of directors if they are supported by the majority of members and are economically feasible.

f. The board of directors must approve a finalized operating budget no later than the end of October each year, in order for new housing charges to come into effect on 1 January (see Occupancy RulesArticle 4.4).

g. During each fiscal year, the board of directors has the authority to spend the operating funds of the co-op up to the amount of the total operating budget. The board can use a surplus in one category of expense to offset a deficit in another category of expense within the overall budget.

A.2. MID-YEAR CHANGES TO ANNUAL OPERATING BUDGET

  1. The board of directors may decide that there should be a change in the operating budget and/or housing charges during a fiscal year.
  2. If so, the board will prepare a budget or statement showing the reason for the change and present it to the members at a general informational meeting. Notice of the meeting must be given in accordance with Section 4.3 of the Occupancy Rules.
  3. Any change in housing charges will be implemented in accordance with the timelines given in Section 4.4 of the Occupancy Rules.

B. SPENDING CONTROL

This section sets out the rules for how the co-op’s money is spent, namely which expenses are discretionary, which are non-discretionary, and who must give permission for each type of spending.

The board will delegate to the Property Manager the authority to spend funds within the limits it sets.

The board may also delegate spending authority to co-op advisory committees or work groups for specific expenses or types of expense, within the limits it sets.

B.1. OPERATING EXPENSES

a. Non-discretionary Expenses

These are expenses that have been approved by the board of directors and are incurred routinely. They include such items as:

  • Mortgage interest and principal
  • Property taxes
  • Property and liability insurance
  • Utilities (hydro, gas, water, waste services)
  • Replacement Reserve Fund
  • Staff salaries & benefits
  • Contracted services (after a contract has been signed)
  • Debt repayment

Bills received for routine, non-discretionary services may be paid by persons designated by the board. If a non-discretionary expense goes over budget, or is expected to go over budget, the Finance Committee must report this at the next meeting of the board of directors.

b. Discretionary Expenses

These are expenses where the co-op has an option as to when (or if) to incur them, how much to spend, and a choice of potential suppliers. They include items such as:

  • Office supplies & related services (e.g. printing, couriers)
  • Interior maintenance services and cleaning supplies
  • Grounds maintenance and landscaping supplies
  • Marketing of co-op suites / co-op promotional activities /publications
  • Board training / member education / educational materials
  • Co-op membership in related organizations / co-op representation at external meetings
  • Support for member social events
  • Member Share Assistance Fund
  • Professional services
  • New contracts with co-op staff
  • New contracts negotiated for any goods or services

Note the above list are examples, the actual list will correspond to the budget line items in current use.

The following rules apply to all discretionary spending:

Expenses under $1,000

  • The board, or other person authorized by the board, is not required to get three (3) written quotations for expenses under $1,000, but must take a prudent approach to all spending. This could include getting a written quote or getting more than one (1) oral quote.
  • The board can delegate authority to the co-op staff to spend lesser amounts. When the board delegates authority, it must set limits on the amounts staff may spend and give any specific directions relating to the type of expenses that it considers appropriate.

Expenses of $1,000 or more

  • The board, or other person authorized by the board, will use a formal tendering process to get three (3) written quotes based on a detailed written scope of work for contracts of $1,000 or more (including yearly renewal of contracts for services).
  • For the purposes of routine maintenance and repair, at the time of budget preparation, three (3) quotations will be obtained from qualified and competent contractors from all trades anticipated being required. At a combined meeting of the Maintenance and Finance Committee, the tenders will be reviewed and discussed. A joint recommendation regarding each trade will be forwarded to the board of directors for their approval.

B.2. CAPITAL EXPENSES

a. If the co-op is planning capital expenditures, the board of directors must prepare a capital budget and work plan for the information of members. If possible, the capital budget should be presented to the members at the same meeting as the operating budget.

b. The capital budget and work plan must show:

  • the list of capital items to be replaced or repaired
  • the estimated cost
  • the proposed source of funds
  • the effect of the proposed expenses on the co-op’s capital reserves
  • the impact of the proposed expenses on the co-op’s future operating and capital budgets
  • the estimated timeline for the capital expenses.

c. At the general informational meeting, the members have the right to question and propose alterations to the capital budget. Following this meeting, approval of the capital budget by the co-op board of directors will authorize the expenditure of funds for the purposes stated, and from the source specified, to a maximum of the total amount budgeted.

d. The board of directors must directly approve contracts and other documents that commit the co-op to spend significant amounts of capital funds.

B.3. EMERGENCY EXPENSES

a. Emergency expenses are those expenses the co-op must make immediately because a delay will:

  • risk property damage, or
  • endanger the safety of persons or property, or
  • disrupt essential services to members (such as electrical power, heat, cooling, water, building security, or fire protection).

b. The board may delegate authority to approve emergency expenditures to the Property Manager or to any other persons.

c. There is no pre-determined spending limit for an emergency expense. All emergency expenditures must be reported immediately to the board of directors and to the Finance Committee.

d. The board must report significant emergency expenditures (over $1,000) to co-op members indicating what is being done, what the cost will be, and when the work will be completed.

B.4. BUDGET CONTROL

a. Each month, the board of directors will receive a budget review from the Property Manager. The report will:

  • compare budgeted income and expenses to actual income and expenses
  • show the projected income and expenses for each category in the budget for the rest of the year
  • identify irregularities

b. If the board has planned capital expenses, the board will receive a summary budget control report prepared by the co-op’s Property Manager. The report will compare budgeted capital expenses to actual expenses.

B.5. SPENDING AUTHORITY

a. The president, vice-president, secretary and treasurer of the co-operative have signing authority (OGHC By-law 2.02). At the first board meeting following the co-op’s Annual General Meeting, the board of directors may, by ordinary resolution, designate other persons to have signing authority. This authorization must be recorded in the board minutes.

b. No person may initiate or approve any expense or purchase that substantially benefits that person or where that person has any conflict of interest with respect to that expense or purchase.

B.6. FAIR, OPEN AND OBJECTIVE BUSINESS PRACTICES

a. The co-op will follow fair, open and objective business practices in all its purchasing and contracting. The co-op’s spending practices and process for awarding contracts must be consistent with the conflict of interest and confidentiality rules in the co-op’s By-laws.

b. Before contracts, written or oral, are entered into by the co-op, committing the co-op to ongoing routine expenditures (for example, staff salaries, management contracts, maintenance contracts), the Treasurer and the Finance Committee must advise the board of directors as to the budgetary implications.

c. There will be no automatic renewal of any contract or agreement. Multiple-year contracts may be signed where this is advantageous to the co-op.

d. For capital repairs and replacements, the co-op may hire consultants to provide advice and/or contract administration services including:

  • assessing deficient building components
  • developing a remedial action plan
  • preparing specifications and tender documents
  • tendering the remedial work and making a recommendation to the co-op
  • administering the contract and inspecting the remedial work.

e. All members of the co-op board of directors have signed an Ethical Conduct Agreement. Any other person authorized by the board to be involved in the formal tendering process must sign a confidentiality agreement that applies to all information about the co-op and all information received from the bidders (see attached Form 1 – Financial Confidentiality Agreement).

f. When choosing a quote or bid, the board, or other person authorized by the board, must consider

  • whether the quote or bid meets the requirements set out in the detailed scope of work,
  • the quality of goods and services to be provided,
  • the relevant experience of the service provider or contractor,
  • references or testimonials obtained by the co-op,
  • the timing of the work,
  • the environmental impact or extent to which the product or service meets the co-op’s environmental standards, and
  • the cost of the work.

g. Preference will be given to co-operatives and not-for-profit providers. The board, or other person authorized by the board, does not have to choose the lowest quote or bid. They may choose another for reasons such as quality, experience and timing. If they do not choose the lowest bid, the reasons for their choice must be documented in the minutes of the board meeting.

C. RESERVE FUNDS

The co-op is required by its By-laws to maintain a minimum general reserve. The co-op’s operating agreement with Manitoba Housing specifies the minimum amount of funds that must be transferred annually to the Replacement Reserve. In addition, the board of directors may decide to establish and maintain other reserve funds for specific purposes.

C.1. GENERAL RESERVE FUND

a. The co-op must establish and maintain a general reserve to retain the surplus, if any, for a financial year. The board may set the percentage of the total assets of the co-op, as reported in the year-end financial statements, which must be retained from the general reserve (By-laws 7.01 and 7.02).

b. At the end of each fiscal year, after the co-op has complied with reserve requirements (including the general reserve), the board may determine how to use the balance of the surplus, if any (By-law 7.03).

C.2. REPLACEMENT RESERVE FUND

a. The purpose of the fund is to have sufficient capital invested for the replacement of capital expenditure items as needed from time to time. The minimum amount of funds to be transferred annually to the Replacement Reserve is specified in the co-op’s operating agreement with Manitoba Housing. The board of directors may determine that a greater amount should be transferred annually, to meet anticipated replacement costs.

b. Allocations to the Replacement Reserve Fund are non-discretionary expenses made on a monthly basis throughout the year, and are based on board approved budgeted amounts for that year. At the end of each fiscal year any surplus from the Maintenance expense budget will be transferred to the Replacement Reserve.

c. A transfer of funds should be made at least quarterly into an established, separate bank account at a financial institution that is used by the co-operative. This transfer supports the balance established in the Replacement Reserve account.

d. The balance in the Replacement Reserve account and the bank account established to fund its purpose should be equal; the Finance Committee should report any over or under funding of the Replacement Reserve account to the board of directors at their next scheduled meeting.

C.3. SHARE REDEMPTION FUND

a. Fifty percent of co-op suites are designated “market” housing and require payment of member shares close to $100,000. The purpose of the fund is to enable the co-op to repurchase member shares from departing residents within six (6) months of receiving their notice of intention to withdraw (in accordance with By-law 6.13), even if a delay occurs in allocating the suite to a new resident.

C.4. MEMBER SHARE ASSISTANCE FUND

a. The purpose of this fund is to enable co-op members to offer financial assistance to low-income applicants for housing who are unable to pay the Member Shares required in full.

b. Subject to the resources available, financial assistance may be provided in the form of partial suite sponsorship, repayable when the member leaves the co-op, or a fixed-term loan to the member (see Member Share Assistance Policy).

D. INVESTMENT

a. The co-operative will accumulate funds in the Replacement Reserve Fund and in other bank accounts over time. To the extent that these funds are not required for their established purposes in the foreseeable future, they may be invested for the benefit of the co-op.

b. The investment objectives of the co-op are:

  • to minimize idle cash holdings
  • to optimize the co-op’s return on investments.
  • to provide the funds necessary for the co-op to carry out capital projects, including improvements and replacements, as required from time to time.
  • to ensure the co-op has adequate working capital.
  • to offset or reduce the effect of inflation on the co-op’s reserves and operations.

c. The Finance Committee shall make investment recommendations to the board of directors in accordance with the following principles:

  • Funds shall be invested in a manner that achieves a reasonable rate of return but does not jeopardize the financial stability of the co-op.
  • Funds shall be invested in the co-operative movement whenever possible.
  • No funds shall be invested in institutions whose activities knowingly conflict with the principles and objectives of the co-operative movement.
  • Funds invested in any one institution shall not exceed the maximum amount insured under the Canada Deposit Insurance Corporation.

d. The Finance Committee may seek advice from financial institutions or financial consultants with regard to suitable investments.

e. On a semi-annual basis, the board of directors will review a schedule of all co-op investments, taking note of the annual rate of return and the management fees levied.

 

 

OGHC Financial Confidentiality Agreement

 

I have agreed to help the co-op in a formal bidding process under the co-op’s Financial Management Policy.

I understand that:

  • I will learn confidential information during the bidding process.
  • I will use any confidential information only to evaluate the bids.
  • I must keep secret any confidential information even after the formal bidding process is over.

Confidential information is:

  • Any information received from bidders.
  • Any information discussed at meetings dealing with the formal bidding process.
  • Any information about the co-op that is relevant to the formal bidding process.
  • Any information about the financial status of an individual co-op member.

Unless authorized by the Old Grace Housing Co-operative board of directors, I agree not to respond to any inquiries related to the formal bidding process.

 

 

Signature:

 

Print Name:                                                                              Position:                                             

 

Signed:                                                                                     Date: