Report to/Rapport au :

Council / au Conseil

22 November 2006 / le 22 novembre 2006

Submitted by/Soumis par : Greg Geddes, Chief Corporate Services Officer/Chef des Services généraux

Contact Person/Personne ressource: Marian Simulik, Director, Financial Services and City Treasurer/Directrice des services financiers et trésorière municipale

(613) 580-2424 x 14159, Marian.Simulik@ottawa.ca

Ref N°: ACS2006-CRS-FIN-0044

SUBJECT:	OPERATING STATUS REPORT - SEPTEMBER 30, 2006
OBJET :	RAPPORT D’ÉTAPES DES DÉPENSES DE FONCTIONNEMENT - AU 30 SEPTEMBRE 2006

REPORT RECOMMENDATION

That Council receive this report for information.

RECOMMANDATION DU RAPPORT

Que le Conseil municipal prenne connaissance du présent rapport.

BACKGROUND

This report represents the third “Quarterly Operating Status” report for 2006 showing actual spending and revenues against amounts budgeted for the period ending September 30, 2006. Any adjustments that have been made to the 2006 budget since the last quarterly report are also identified.

In keeping with the recommendations of the “It’s About Accountability” report, a forecast for 2006 is also provided. The inclusion of a forecast allows for the identification of any potential areas where spending priorities need to be adjusted or areas that need to be monitored over the remaining months of the year.

As directed by Council, a compensation schedule showing the actual salary / benefits and overtime costs incurred by department / branch to September 30^th versus the full year budget has also been included in this Status report.

DISCUSSION

3^rd Quarter Year-to-Date Results

As part of the City’s commitment towards improved financial transparency and accountability, the presentation of the financial information in the 2006 quarterly operating status reports are presented on a “calendarized” basis. This calendarization takes into account the seasonal nature of various City services and matches actual spending or revenues against the budget for the same time period, instead of against the whole year budget. This format change for 2006 allows City management to detect potential spending or revenue issues at an earlier point in the year and implement corrective action. Appendix A to this report shows the nine month year-to-date actual expenditures and revenues compared to the same period budget.

The results for the nine-month period indicate that the expenditures and revenues of the majority of City departments and non-departmental accounts are tracking close to the 100% level. In fact, the actual expenditures incurred to September 30^th for the majority of departments are currently below the 100% level. Because of timing issues related to the actual processing and recording of expenditures and revenues, departments have reviewed these results incorporating any timing issues in the development of their 2006 forecasts.

Budget Adjustments and Transfers

A summary of the major budget adjustments and transfers made since the June 30 Status Report, either through the delegated authority given to the City Treasurer or through Council-approved reports, are as follows:

Nature of Budget Adjustment	$M	Funding Source	Net Effect on Budget Revenues and Expenditures
Adjustment to the Housing program to reflect additional funding for the Supporting Communities Partnership Initiative (SCPI)	$2.5	Increased provincial subsidy	Increase to both revenues and expenditures
Increase to the Employment and Financial Assistance Branch to reflect the adjustment to the provincial subsidy based upon the revised calculation for the National Childcare Benefit	$1.3	Increased provincial subsidy	Increase to both revenues and expenditures
Increase to Financial Services branch, the penalty and interest revenue and the tax relief/grant account to reflect Council’s approval of the farm grant program on May 24, 2006	$0.235	Grant program is self-financing. Financial Services costs recovered through one-time funding source	Increase to both revenues and expenditures

The total effect of the adjustments to the budget, including those listed above is that the gross expenditures and revenue budget has been increased by $4.3 million to $2.139 billion.

In addition to the above adjustments that resulted in the increase to the City’s total corporate expenditure and revenue budgets, the following adjustments between branches within a department were made to more appropriately realign program costs. No change to the overall total corporate budget results from these adjustments

Budget Transfers	$M
Adjustment between Employment and Financial Assistance and Cultural Services and Community Funding to better facilitate the presentation of community assistance grants that are funded from the National Childcare Benefit savings.	$4.3
Transfer from Information Technology to Real Property Asset Management for Business Continuity Planning.	$0.3

Additional Operating Pressures for 2007

During the first three quarters of 2006, Council has approved a number of reports that have funding implications for the 2007 operating budget. In order to keep Council apprised of their decisions and the impacts on the 2007 budget, the following table lists the reports and the potential financial impact:

Report / Recommendations	Council Date	2007Impact $000
Budget 2006 – Information on Budget Reductions and Service Delivery Improvements / Overtime Savings Targets	Feb 20
Services identified for reduction which were reinstated with one-time funding
Parks & Recreation – various programs		292
Public Health – children / youth programs		112
Cultural Services & Community Funding – Museum Sustainability Plan / Arts Court, Arts funding		83
Financial Services – tax clerks		212
Planning, Environment & Infrastructure Approvals – Forester position		82
Surface Operations – Shrub maintenance		55
Transit Services – route reinstatements		206
Wastewater Services – sewer lateral investigations (rate supported)		73
		1,115
Canadian Tulip Festival Request for Emergency Funding	April 12	23
OC Transpo shuttle service
Creation of the Rural Affairs Office and Rural Summit Workplan Status Update	April 26	100
Agriculture & Rural Affairs Committee support
Ottawa Public Library - Pay Equity Program ACS2006-CRS-EMP-003	April 12	1,000
Expansion of Local Calling Area - Toll-Free Calling ACS2006-PGM-ECO-009	June 14	25
Community Funding Framework Policy - PhaseII ACS2006-CPS-CSF-001	Feb 8	500
Late Payment Due Date – calculation of Penalty & Interest	Sept 13	100
Francophone subsidized child care spaces – 3 year implementation ACS2006-CPs-PAR-0013	Oct 11	767
Museum Sustainability Plan – Final Report ACS2005-CPS-CSF-0012	Sept 28 (2005)	740
Total Impacts		4,370

2006 Year End Forecast

In the June 30^th Status report, a forecast of the City’s year-end financial position was provided. Based on the information available at that time, a deficit of $7.5 million was projected. With over 10 months of actual results and a careful review of budgetary requirements for the remainder of the year, City staff are projecting a small surplus of $1.2 million, representing 0.06% of the total budget expenditures or 0.1% of property tax revenues. Appendix B provides details of the 2006 year-end forecast by department and branch. The major factors contributing to the change between the June 30^th and September 30^th forecasts are described below.

Departmental Changes

In total, the departmental forecasts are projecting a $6.3 million surplus representing an increase of $5.6 million from the June 30^th forecast. While there are a number of favourable changes to the original June 30^th forecast which are partially offset by unfavourable changes, the majority of the increase is accounted for in the following areas:

· Lower than anticipated hydro and natural gas rates and a mild heating season to date;

· Reduced Ontario Works caseload than projected;

· Additional approved Paramedic staffing to occur later in the year resulting in vacancy savings; and

· Review of operations and implementing initiatives to contain and/or reduce projected deficit within Surface Operations without negatively impacting service standards.

Although not reflected in the 2006 forecast, the Building Services branch is projecting to end the year in a surplus position.

With the passage of the Building Code Statute Law Amendment Act and Regulation 305/03 (Bill 124), the Province recognized the need for reserve funds to ensure municipalities are able to fulfill their legislative mandate despite a downturn in construction activity, and to cover long term capital investments and special costs / liabilities. The 2006 surplus revenues will be directed to these non-discretionary funds and this will be repeated in subsequent years until the reserves are fully funded. Once this threshold has been achieved, the building permit fee rate will be adjusted to cover only the direct and indirect costs and may result in the fee rate being adjusted downward.

Non-Departmental Accounts

The deficit of $8.2 million, as projected in the June 30^th Status report, is expected to decline to $5.1 million - a reduction of $3.1 million. The major factors contributing to this favourable e change between the June 30^th and September 30^th forecasts are described below.

· Water and sewer surcharge revenues are now projected to be higher and closer to budget;

· Penalty & Interest and Provincial Offence revenues are expected to be higher but still below budget levels;

· Revenues from Payment in lieu of taxes are projected to be higher; and

· Based on the supplementary tax billings, the additional revenue, while still higher than budget, will be lower than the June 30^th projections.

Should the year-end position of the City not result in a surplus, funds are available in the Tax Stabilization Reserve Fund to cover deficit situations. A final year-end report on operations will be forwarded to Council in the first half of 2007 once the City’s auditors have completed their review of the financial statements.

2006 Compensation

During the consideration of the Auditor General’s “2005 Annual Report and 2005 Detailed Audit” reports, Council adopted the following motion:

Be it further resolved that for the remainder of 2006, the Operating Status and Forecast Report provide City Council with a detailed accounting of compensation, including actual allocations for overtime, salary and benefits.

Included, as Appendix C, is a schedule that addresses this directive. Departmental and branch actual compensation expenditures from January 1^st to September 30^th have been compared against the annual 2006 compensation budgets. The total actual and budget provisions have been presented in the schedule under the following three categories:

1. Salary and Benefits (excluding overtime)
2. Overtime
3. Total Compensation

CONSULTATION

All departments were consulted in the preparation of this report.

FINANCIAL IMPLICATIONS

Based on current projections, a potential operating surplus of $1.2 million is forecast. Staff will be monitoring the City’s expenditures and revenues over the remaining weeks of 2006 and their impacts on the City’s financial position.

ATTACHMENTS

Appendix A – 2006 Operating Status Report as of September 30, 2006.

Appendix B – 2006 Operating Budget Forecast

Appendix C – 2006 Compensation & Benefits / Overtime Report as of September 30, 2006.