Government Finance Officers
Association of British Columbia

The rapid outbreak of the coronavirus (COVID-19) presents an alarming health crisis that the world is grappling with. Local governments in BC are responding quickly by activating emergency response plans, identifying essential services requiring uninterrupted access, transitioning to remote work environments and demonstrating resilience and agility in adapting to daily changes.  Finance functions have been focused on not only business as usual during a busy budget, year end and tax time, but also cash flow management and forecasting.  Highlights of activities local governments are focused on during this time include:

  1. Determine how to convene meetings electronically
  2. Maintain internal controls for Work from Home finance teams
  3. Take stock of upcoming deadlines and stay the course
  4. Exercise sound financial management to support local government liquidity
  5. Leverage provincial and federal tax relief programs
  6. Understand the benefits available to employees
  7. Develop economic recovery plan
  8. Keep lessons learned for future consideration
  9. Stay connected with each other

Determine how to convene meetings electronically
Section 221 of the Local Government Act provides information for how meetings may be conducted electronically.  A bylaw may be necessary to specify the procedural requirements to allow meetings to be conducted by electronic means.  Bylaws should include specifics to authorize electronic participation, enable participants to see and hear each other and for members of the public to attend, see and hear the meeting. 

Maintain internal controls for Work from Home finance teams
Remote workers have access to data, information and network resources.  This may attract imminent attention from bad guys.  Expect an increase in phishing attempts and be wary of requests that break approved policy.  Reinforce internal controls and existing policy regarding payment authorization and security.  Times of high stress and change are when cyber-attacks are more likely to occur. Be wary of anything ‘urging you’ to access information via a third-party or attachment files, especially if related to COVID-19.  As a high volume of financial transactions are typically conducted by local governments during property tax time, reminders to remote teams are important. 

Take stock of upcoming deadlines and stay the course
While operational demands are high, take stock of existing deadlines and prioritize accordingly, with reference to Ministry expectations.  Focus on adoption of the financial plan and tax rate approval.  Stay the course on issuing tax notices and collecting payments to maintain positive cash inflows and ensure that payments to your regional districts are made.  Government programs are focused on providing individuals and businesses with continuing income to meet property tax payment obligations. 

Exercise sound financial management to support local government liquidity
Maintaining access to cash and liquidity is essential during this time.  Gaining visibility over cash flows and managing operating and capital needs is critical. 

  • Model potential scenarios to understand the levers you can control and draw on as needed.  Continuously revisit assumptions with real time information and understand the sensitivity of changes on your overall cash position.    
    • For each significant revenue stream – what are the potential impacts on the amount and timing of cash collected?  Consider the timing of tax and utility payments, recreation revenue, commercial revenue, investment income, parking fees, casino revenue, etc.
    • Prioritize critical expenditures – maintain compliance with fixed, non-negotiable payments.  Long-term debt and interest payments are owing on scheduled dates.  The initial remittance of school tax of 75% of the total levy, or or lesser percentage where the municipality statisfies the Surveyor of Taxes that it has collected less than 75%, is due on the 5th business day after the municipal tax due date.
    • Evaluate the flexibility in timing and amount of discretionary spending, and other requests by Council financial plans are evaluated and tax rates considered.  BC’s list of COVID-19 essential services can act as a guide for identifying non-discretionary service requirements.  Inform and equip Councils with the financial implications of alternatives and potential decisions before public commitments are made. 
  • Consider the timing and scope of non-essential capital projects as well a financing options – are there opportunities to defer capital outlay, obtain financing through leases rather than cash payment or modify the scope of projects to preserve cash if needed.  Can the payment schedule for committed and future projects be modified to respond to your cash needs?
  • Align your investment decisions and access to cash with your cash flow forecast; maintain high credit quality in your portfolios.  Do not try to maximize returns by locking in rates for longer periods of time.  Carry sufficient cash and liquid, high quality assets to support operating needs and uncertainty in the upcoming months. 
  • If shortfalls are anticipated, plan for how to access cash.  Evaluate the use of reserves and take steps necessary to access them (when and what type of legislative approval is required).  If reserves are used, will they be replenished with interest and when.  What is your liability servicing limit and borrowing capacity?  Plan ahead as bylaws and resolutions are necessary for application to access short term borrowing. Draw on financing only when and as needed to help maintain access to funding for all local governments that need it. Incorporate financing costs into your cash flow forecast. 

Leverage provincial and federal tax relief programs
There are a number of tax relief programs available to local governments to assist with payment deferral.  New programs are being announced continuously; stay informed and leverage what is available to manage cash flow:

  • Local governments with payroll over $500,000 can defer employer health tax and both filing and payment of PST to September 30, 2020.  Those will payroll less than $500,000 are already exempt from EHT. Hotel tax, carbon tax, motor fuel tax and tobacco tax are also deferred.
  • GST remittances and customs duty payments are deferred to June 30, 2020.  Monthly GST filers can defer amounts collected for February – April reporting periods; quarterly filers can defer amounts collected for January through March reporting periods, annual filers can defer filing their return and instalment payments due in March through May 2020 to end of June.  
  • Worksafe BC will not impose penalties on Q1 2020 premium payments usually due April 20 until June 20, 2020.         
  • Canada Emergency wage Subsidy (CEWS) – Local governments and entities controlled by local governments are not eligible for the 75% federal wage subsidy, however, may be eligible for the 10%
  • Corporations can defer income taxes owing and installments owing until September 1, 2020. Consider all ancillary operations such as recreation centres, airports, casinos, incorporated separately from the local government.
  • Wage subsidy - While local government themselves are not eligible for the federal wage subsidy, subsidiaries and entities under the local government's control incorporated as corporations, registered charities or not for profit organizations are eligible if revenues have declined at least 30% - the subsidy amount is 75% of employee pay up to $847/week between March 15 and June 6, 2020 claimed as a deduction from payroll remittances. More details are being announced daily on eligibility, per employee and employer limits.
  • Corporations can defer income taxes owing and installments owing until September 1, 2020. Consider all ancillary operations such as recreation centres, airports, casinos, incorporated separately from the local government.
  • Emergency Management BC (EMBC) Policy 5.13 includes costs eligible for reimbursement by EMBC including incremental costs of activating an Emergency Operations Centre, supporting additional health capacity, implementation of provincial measures, continuation of essential services and training and equipping individuals to meet the needs of persons in isolation and unable to access support networks.  Establish appropriate tracking methods to quantify and support costs that can be claimed for reimbursement.
  • The federal government is waiving ground lease rents from March 2020 through to December 2020 for the 21 airport authorities that pay rent to the federal government.

Understand the benefits available to employees

  • Supplemental unemployment benefit plan (SUB) – this plan can increase an employees’ weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury or quarantine.  This is similar to a top up of earnings during maternity/paternity leave, and does not grind EI benefits entitlement.
  • Canada Emergency Response Benefit - $2,000/month for up to 4 months for workers who are a) sick, quarantined or taking care of someone who is sick with COVID-19; b) employed but not paid because of insufficient work; c) contract worker not eligible for EI.
  • Employment Insurance Sickness Benefit – if employees are sick, quarantined or have been directed to self-isolate, the requirement for a medical certificate is waived to access EI benefits.

Develop economic recovery plan
On the longer term horizon, consider how the local government will replace lost revenue, adjust and emerge from the economic impacts of COVID-19.  Where will investments be made and using what criteria and timeline to achieve financial stability and growth.  Who are the intended beneficiaries and how will you know if benefits are being achieved.

Keep lessons learned for future consideration
Identify longer term gaps in people, process and technology that may have been highlighted during the last few weeks, to be addressed at a later date.  For example, the local government’s overall digital strategy and workforce planning may have been areas that were tested and noteworthy for refining when a new normal is achieved.  Lessons learned from experiences such as flooding in Calgary, wildfires in BC and COVID-19 make us better equipped for future crisis prevention, management and recovery.

Stay connected with each other
All communities are facing similar issues and adapting quickly to daily changes.  Support each other by staying in touch – sharing resources, analyses, forecasts, plans and other relevant materials.  The volume of information at this time is high – each local government may consider the information in unique ways - what one local government is embracing is an opportunity for all to benefit from.  GFOABC’s Forum is a great space to share questions and ideas.  Future GFOABC COVID-19 updates will be based on areas of greatest interest.