The Government of the Northwest Territories uses a comprehensive business planning approach, which guides the development of the Budget (Main Estimates). Business planning provides a link between strategic planning and the allocation of fiscal and human resources to programs, services and initiatives. Generally, business plans flow from an organization’s longer-term strategic plan, but deal with a shorter time frame, propose further information on implementation of actions for the strategic plan.
The Main Estimates process has several phases:
- Fiscal Strategy development;
- Business Plan development and review;
- Main Estimates development process;
- Budget Address development;
- Presentation to the Legislative Assembly; and,
- Preparation and entry of budgets into the System for Accountability and Management (SAM).
During the course of any given fiscal year, the Budget is monitored and adjusted as necessary through:
- Variance Reporting - monitoring of expenditures and revenues against Budgets; and,
- Supplementary Estimates.
Budget Development Process
1.Fiscal Strategy Development
Under the direction of the Minister of Finance, the Department of Finance prepares a multi-year fiscal framework. The framework is an overview of the projected financial position of the government based on a set of assumptions about revenues, expenditures, and federal transfer payments.
In the development of a fiscal strategy, the framework is used as a modeling tool to project the fiscal position of the government, assuming current policies and trends are maintained, as well as alternate positions based on various policy changes, new policies and new initiatives. This allows the Financial Management Board and the Executive Council to assess whether the current mix of expenditures and taxes are appropriate. If the mix cannot be sustained, or change is desired for policy reasons, it allows for an evaluation of alternatives in expenditures, taxation, and borrowing.
Based on the government’s current financial position, program objectives and the fiscal alternative chosen, targets for each department are approved by the Financial Management Board and instructions are issued to departments for the development of multi-year business plans.
2.Business Plan Development and Review
The business planning process includes setting goals, developing strategies to achieve the goals, and establishing targets and outcome measures. The Executive Council approves a Business Plan, which sets goals and strategic priorities for the government. The departmental business plans are developed to support the overall Government’s goals. As part of the process, departments identify the challenges and pressures confronting them, and map out how to meet those challenges within available resources. Business Plans identify key strategies that each department will implement to achieve its goals, and also identify outcome measures and targets to be achieved.
Business plans focus on both operation expenditures and infrastructure investment. However, the Capital Plan portion is tabled and approved in the fall session of the Legislative Assembly to allow contracts to be finalized in time for suppliers to take advantage of the winter road season so approved projects can be completed in the upcoming fiscal year.
Budget Cycle for Capital
Planning for capital, which includes infrastructure such as roads, airports, schools, hospitals, clinics, park buildings, is a separate budget.
The capital budget depends on the amount of operating surpluses that are available to fund a minimum of 50 per cent of capital spending, and how close the Government is to the federally-imposed borrowing limit. A single capital investment target is established and each department’s projects compete with other projects on a government-wide basis to determine priority.
The capital planning process for each planning cycle starts with community consultations to ensure that community needs are considered in the development of the initial capital needs assessments completed by departments. Projects included in the first five years of the needs assessment are then rated against a common set of criteria.
3.Main Estimates Development Process
Once the business plans and infrastructure acquisition plan have been reviewed by Standing Committees, departments proceed to prepare their annual estimates.
Each department is responsible for the development of their budget in enough detail to meet the requirements of the Main Estimates and provide for the budget to be loaded into the System for Accountability and Management (SAM).
The Department of Finance coordinates all departmental information to produce the Main Estimates and it is responsible for coordinating the input of the budget into SAM once it is approved by the Legislative Assembly.
The Main Estimates are reviewed by the Department of Finance for uniformity, consistency of presentation and adherence to targets and guidelines. The Financial Management Board then approves the Draft Main Estimates for forwarding to the Legislative Assembly Standing Committees for their review before the Budget Session starts.
4.Budget Address Development
Under the direction of the Minister of Finance, the Department of Finance drafts the text of the Budget Address.
The Budget Address includes an outline of current trends and anticipated developments and identifies the Government’s plan of action, related to its established strategies and priorities, for the upcoming fiscal year.
In addition, the Budget Address highlights new tax and program initiatives and their expected impacts on the economy and Government revenues or expenditures.
Many individuals and organizations, both from within the government and from the public have been consulted during the planning and development stages of the budget process. However, the exact content of the Budget is not public until tabled in the Legislative Assembly by the Minister of Finance. Traditionally, the budget presentation process prevents special interest advantages being obtained through advance information on government fiscal initiatives.
5.Presentation to the Legislative Assembly
Following the presentation of the Budget Address to the Legislative Assembly by the Minister of Finance, the Main Estimates are released to Members of the Legislative Assembly, the general public, and the media. After the Legislative Assembly has completed its review, the Assembly approves the Appropriation Act.
6.Variance Reporting - Monitoring of Expenditures and Revenues against Budgets
Departments must report monthly to the Financial Management Board on the status of their expenditures and revenues compared to their budget and provide projections to year-end.
The variance information and revised year-end projections are used during the year to monitor actual performance against the Government’s fiscal framework and anticipate requirements for supplementary appropriations and any incremental borrowing.
During the course of any given year, increases may be required to a department’s spending authority. This is accomplished by way of Supplementary Estimates. They are presented to the Legislative Assembly for approval during regular sittings of the House.
In emergency situations, the Financial Management Board may recommend a Special Warrant to the Commissioner for advanced spending authority, to allow a department to respond quickly to a new or unforeseen need that meets the criteria of an emergency as defined by the Financial Administration Act and the Financial Administration Manual. The Special Warrant is included in the subsequent Supplementary Estimate.
Fiscal Responsibility Policy
The Fiscal Responsibility Policy is designed to provide the framework by which the government will borrow, and manage the attendant debt levels and interest costs. It is designed to provide rules to govern both for which purposes the government may borrow as well as how much debt it can accumulate.
The main provisions of the Policy dictate that:
- Debt will be taken on only for capital infrastructure and other investments, not to finance program spending;
- Capital infrastructure and investments will be financed with a 50% minimum of cash generated from operating surpluses (maximum of 50% debt financing);
- Debt servicing payments will not exceed 5 per cent of total revenues; and
- Debt will be repaid according to certain rules.