4.     OPERATING STATUS REPORT – MARCH 31, 2008

 

RAPPORT D’ÉTAPE DES DÉPENSES DE FONCTIONNEMENT – 31 MARS 2008

 

 

 

Committee Recommendation

 

That Council receive this report for information.

 

 

 

Recommandation du Comité

 

Que le Conseil prenne connaissance de ce rapport.

 

 

 

Documentation

 

1.   City Treasurer’s report dated 9 May 2008 (ACS2008-CMR-FIN-0021).

 

Report to/Rapport au :

 

Corporate Services and Economic Development Committee
Comité des services organistionnels et du développement économique

 

and Council et au Conseil

 

9 May 2008 / le 9 mai 2008

 

Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale

 

Contact Person/Personne ressource: Tom Fedec,
A/Manager, Financial Planning/Planification financière

Financial Services/Services financiers

(613) 580-2424 ext. 21316, Tom.Fedec@ottawa.ca

 

Ref N°: ACS2008-CMR-FIN-0021

 

SUBJECT:

OPERATING STATUS REPORT – MARCH 31, 2008

 

 

OBJET :

RAPPORT D’ÉTAPE DES DÉPENSES DE FONCTIONNEMENT – 31 MARS 2008

 

 

RECOMMENDATION DU RAPPORT

 

That the Corporate Services and Economic Development Committee and Council receive this report for information.

 

 

RECOMMANDATION DU RAPPORT

 

Que le Comité des services organisationnels et du développement économique et le Conseil prennent connaissance de ce rapport.

 

 

BACKGROUND

 

This report represents the first of three “Quarterly Operating Status” reports that will be prepared during 2008 showing actual spending and revenues against amounts budgeted.  A detailed forecast for 2008 is not provided at this point in the year, but will be included in the June 30th and September 30th reports.

 

The year-to-date actual expenditures and revenues are compared against the budget for the corresponding time frame.  Departmental and branch budgets have been “calendarized’ to account for the seasonal nature of various City services and allow for the matching of actual spending or revenues against the budget for the same time period, instead of against the whole year’s budget.  This format allows City management to detect potential spending or revenue issues at an earlier point in the year and implement corrective actions where required. 

 

The presentation of first quarter results in Document 1 has been modified to separate the tax-supported programs from the rate-supported programs.  This is in keeping with Council’s direction to separately review and approve the 2008 budget for these programs.

 

Document 2 provides compensation information showing the actual salary / benefits and overtime costs incurred by department / branch to March 31st versus the full year budget and Document 3 provides projected year-end balances for the various City capital and operating reserves.

 

 

DISCUSSION 

 

Budget Allocation Methodology

 

Departments have allocated their 2008 budgets on a monthly / quarterly basis based primarily on past experience.  Programs such as winter maintenance and recreational programs (outdoor pools / beaches) have definite seasonal spending patterns.  There are other program expenditures or revenues which are not seasonal in nature or do not occur evenly through the year.  These are therefore more difficult to allocate to a specific month or months.  These types of program costs or revenues may occur at specific time periods during the year, for example, a maintenance contract may be expected to be paid by the end March – therefore the budget is reflected in March.  However, delays in the receipt of the invoice or payment delays may result in the actual posting of the expenditure in April resulting in a misalignment of the actuals with budget.

 

March 31, 2008 Results

 

Document 1 to this report shows the first quarter actual expenditures and revenues compared to the same period budget.  For reference purposes, the annual budget for the branch or program area is also provided.  At this early point in the year and the fact that the 2008 budget was only recently approved and finalized on March 26, it would be expected that the actual results against budget for the first quarter would be below 100%.  The June 30th Status Report will provide a better indication as to whether spending and revenues are tracking to budget.

 

As can be seen from Document 1, the majority of departmental and non-departmental programs are tracking to budget although there are a few areas that show a higher than expected variance for the first quarter.  All departments have been asked to review their first quarter results to ensure that their respective spending and revenue results are not indicative of any underlying issues that need to be highlighted or addressed at this time.  Additional information on specific program areas is provided below where a significant variance from budget has occurred.

 
Surface Operations - Winter Control Program

 

Expenditures incurred to date represent 144% of the budget due primarily to the severity of the past winter with snow volumes almost surpassing the historical record.  The winter control program is $18 million over spent as of March 31.

 

Efficiency Targets

 

a)      Prior Year Corporate Efficiency Targets

 

The 2008 adopted budget reflects the carry-forward of $13.2 million of efficiency targets from previous City budgets.  As an interim strategy to manage this target, a “temporary” gapping program was implemented in 2007.  The concept behind this strategy was in recognition that new FTE’s approved in the budget are unlikely to be staffed immediately and that there will therefore be unspent compensation dollars during the year.  Based on the March 31st results, $4.3 million has been allocated to departments as temporary gapping, thereby reducing the prior year efficiency target to $8.9 million.  Staff is reviewing options with the objective to determine whether this target can be accommodated within departmental budgets as part of their base gapping provision.  In conjunction with this review, a corporate gapping policy will be developed for implementation this year.   

 

b)   3-Year Efficiency Targets

 

In the 2008 budget and the high level forecasts for 2009 and 2010, Council approved $100 million in productivity and efficiency targets.  The savings are to be achieved utilizing four approaches :

 

1.      Productivity – to be achieved through continuous improvement initiatives to ongoing administration and service delivery operations.

2.      Technology – to be achieved by conducting business a case analysis on each of the proposed technology investments.

3.      Asset Rationalization – to be realized from facility closures or consolidation

4.      Procurement – to be identified through a consultant facilitated analysis of overall corporate procurement strategies.

 

The amount of savings to be achieved in each year is summarized below.

 

 

2008

2009

2010

Total

 

$ 000

$ 000

$ 000

$ 000

Productivity

       10,500

       10,750

       13,750

       35,000

Technology

                -

         5,000

       10,000

       15,000

Asset Rationalization

         2,000

         5,000

         8,000

       15,000

Procurement

       12,500

         8,750

       13,750

       35,000

Total

       25,000

       29,500

       45,500

     100,000

 

The targets for Productivity savings have been allocated to specific branches within departments, while the other 3 targets are being managed by Information Technology Services branch (Technology savings), Real Property Asset Management branch (Asset rationalization savings) and Financial Services branch (Procurement savings).  Reports on each of the four areas, which will outline the process and activities to date, are to be presented to the Corporate Services & Economic Development Committee and Council in May.

 

Other Issues

 

Provincial Cost Sharing

 

The 2008 budget reflects Council’s decision to incorporate the additional provincial funding that should be provided to the City under the provincial cost-sharing formula.  Approximately $11 million has been included in the 2008 budget in the program areas listed in the table below.  There have been no indications to date that the Province will provide this additional level of funding.  

 


 


Diesel Fuel

 

The 2008 budget for diesel fuel assumes an average annual price of $0.92 per litre.  For the first quarter of 2008, the average price that the City has paid for diesel has been closer to $0.96   Fuel prices have continued to rise over the past several weeks putting increased pressures on the diesel fuel budget.  Currently the floating price for diesel is $1.1683 per litre, while the 6-month lock-in price is $1.1289 per litre.  Staff is monitoring the situation and will provide an update in the June 30th Status report.  

 

c)   Additional Operating Pressures for 2009

 

During the course of the year, Council will approve reports that may have funding implications for the 2009 operating budget.  This section of the Quarterly report is provided to keep Council apprised of their decisions and the impacts on the 2009 budget.  In the January 1st to March 31st time period, no reports have been approved by Council with 2009 funding implications.

 

 

CONSULTATION

 

All departments were consulted in the preparation of this report.

 

 

FINANCIAL IMPLICATIONS

 

As this report is for information purposes, there are no financial implications.

 

 

ATTACHMENTS

Document 1 – 2008 Operating Status Report as of March 31, 2008. 

Document 2 – 2008 Compensation Report as of March 31, 2008

Document 3 – Projected 2008 Year-end Reserve and Reserve Fund Balances