Legal Studies 479
Unit 4: Municipal Finances
Although municipalities exercise a great deal of control over their finances, it is apparent from a review of the Act that the Minister of Municipal Affairs has a great deal of power and can exercise a broad supervisory jurisdiction over municipalities in relation to their finances.
Through the ability to set regulations, the Minister has the power to
In addition to the above powers, the Minister exercises almost ultimate financial control of a municipality by virtue of his ability to appoint an auditor to review the financial affairs of a municipality. The Minister is able to appoint an auditor if he, himself, considers the audit needed, or if a council so requests, or not less than one–third of the councillors of that municipality request that the Minister appoint an auditor (section 282). This is not to say that the Minister is compelled to appoint an auditor upon request. However, it does show the degree of oversight given to the Minister to ensure that the financial affairs of municipalities are overseen properly.
Although the Act imposes an obligation on a municipality to establish both operating and capital budgets and to make expenditures in accordance with those budgets, individual councillors are at risk of civil liability if they make expenditures not authorized under section 248 (operating budget, capital budget or interim budget); vote to spend borrowed money; or grant money for a purpose other than that for which it is borrowed or granted (section 249). The financial obligations are so serious in the Act that the municipality, an elector or a taxpayer of the municipality, or a person who holds a security under a borrowing made by the municipality, can take civil action against a councillor.
In the same way, a municipality cannot borrow, make a loan, or guarantee the repayment of a loan that causes the municipality to exceed its debt limit. However, a councillor who votes for the bylaw authorizing the borrowing, loan or guarantee is liable to the municipality for the amount borrowed, loaned or guaranteed, unless the borrowing, loan or guarantee has been approved by the Minister (section 275). As with section 249, the municipality, an elector or taxpayer of the municipality, or the person who holds security under the borrowing, is entitled to enforce the liability.
Although there has been no judicial consideration of these sections, it is arguable that a councillor who is in breach of sections 249 or 275 would not be acting in good faith and, therefore, would not be protected under the indemnity provisions of section 535.
Pursuant to section 3 of the Act, the purpose of a municipality is to provide services, facilities or other things that the municipal council believes is necessary or desirable for all or a part of the municipality. The municipality will, therefore, establish the programs to provide services to its citizens and determine what infrastructure is necessary to provide the facilities it requires. It would be fair to say that almost everything a municipality does or constructs costs money. Therefore, the task that falls upon the municipality is to determine how to fund those services and facilities, recognizing the limits to funding imposed upon municipalities by the Act.
The obligations of a municipality in relation to its financial matters are found in the Act at Part 8—Financial Administration. As stated above, however, the provisions of the Act, itself, are only the starting point in relation to the financial administration of a municipality. Unlike other areas of the Act, where the statutory provisions set out the entire scope of the regulatory scheme, in the area of financial administration, the municipal administrator must be aware of the plethora of regulations that govern municipalities, which are set out as follows: