Financial Matters - Municipal Government Act

The new Municipal Government Act describes changes to municipal financial matters including changes to time period of the fiscal year, requirements for a financial plan, budget and audit, procedures for  addressing a surplus, deficit, borrowing, and establishing reserve funds as well as process for municipal taxation.

Fiscal Year

The fiscal year for municipalities is changing. Commencing on April 1, 2019, the fiscal year will run from April 1 to March 31. In order to aid this transition, the period from January 1, 2017, to March 31, 2019, covers two fiscal years as follows: January 1, 2017, to December 31, 2017; and January 1, 2018, to March 31, 2019.

Financial Plan 

Municipalities will be required to develop and adopt a financial plan by March 31 for the next fiscal year to support responsible long term financial planning. The financial plan must include an operating budget, capital budget, 5-year capital plan, and an asset management strategy. Municipal councils will be required to give public notice and hold a public meeting regarding the financial plan prior to adopting it.


All municipal councils will now have authority to approve their annual budgets without the requirement for public voting.


A council cannot project a deficit in its operating budget for any fiscal year other than for amortization and its public utility. If an operating deficit is projected at the end of a fiscal year that is not offset from a reserve fund or surplus fund, the operating deficit must be debited to the operating fund for the next fiscal year unless the Minister has approved another way to address it.

If a municipal council determines during the fiscal year that their operating expenses are likely exceed revenues and transfers provided for in their operating budget by more than five percent, the council must notify the Minister immediately and the Minister may approve the operational deficit for that fiscal year. 


There is greater clarity and guidance regarding borrowing. Municipal councils will be required to establish a bylaw in order to borrow money for capital costs and money borrowed by a council for a capital cost cannot be used for any purpose other than the purpose stated in the bylaw. A council may also authorize the borrowing of money to finance operational costs, but only on a short term basis.

Reserve Funds

There is greater clarity and guidance regarding reserve funds. Municipal councils will be required to establish a bylaw regarding contribution, withdrawal and transfer of money from reserve funds.

Audit and Review Engagement

All municipalities will be required to appoint an auditor to conduct an annual audit that meets public sector accounting standards by March 31, 2019. Until March 31, 2019, existing municipalities that have an annual budget of less than $50,000 can dispense with the audit requirement and, instead, appoint an auditor to undertake a review engagement.  A review engagement involves the preparation and review of financial statements to determine whether or not they are credible.


Audit and review engagement reports for the previous fiscal year must be produced and submitted to the Chief Administrative Officer (CAO) of a municipality each year on or before June 30.The CAO must then forward a copy of report to the council and the Minister no later than July 15  in that year.

Municipal Taxation

Councils will set tax rates within the municipality by resolution. A council may, by bylaw, establish tax rate groups within the municipality and apply different tax rates to each group to reflect differences in the services or levels of service provided to each group. A council may also set a different tax rate where it has created a levy group based on property use or type. Council must notify the Provincial Tax Commissioner in writing regarding the rate or rates of taxation to be set for the period of January to December prior to March 31 of the year to which the rates apply. Notification to the Tax Commissioner will also be required if a municipality changes its boundaries, tax areas or levy groups between January 1 of the current tax year and January 1 of the previous tax year.

Procurement Agreements

All municipal purchasing as well as the procurement of goods and services and/or contracts for construction must meet the terms and conditions set out in the Atlantic Procurement Agreement, the Agreement on Internal Trade, and any other trade agreement directed by the Lieutenant Governor and Council.   

Existing Legislation: What’s in Place Currently

The fiscal year for municipalities is the calendar year.

Budget estimates of communities must be voted on and approved by residents. Following the approval of the budget estimates for any year and after crediting expected revenue from all sources, a municipal council may, by resolution set a rate of municipal taxation.

Municipal councils must not project a deficit in their annual budgets for expenses other than capital expenses.

A council may dispense with the audit requirement if annual budgeted expenses are less than $50,000.

A municipal council may establish a reserve fund for capital project costs and the cost of any land, machinery or equipment necessary for the completion of projects.

Note: This document is prepared by the Municipal Affairs Section of the Department of Communities, Land and Environment for general information purposes. This document should not be relied upon as a substitute for specialized legal or professional advice. 
Published date: 
January 6, 2017
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