1. FINANCIAL STATEMENTS FOR IN-HOUSE
SOLID WASTE COLLECTION - 2011 EXTERNAL
AUDIT RESULTS
ÉTATS FINANCIERS POUR LA COLLECTE DES DÉCHETS SOLIDES
PAR LA VILLE – RÉSULTATS DE LA VÉRIFICATION EXTERNE DE 2011
1.
That Council
receive this report for information; and,
2.
That Council extend the reporting period for
year 6 of the In-house Collection Operations to October 27, 2012.
1.
Que le Conseil prenne connaissance de ce rapport;
et,
2.
Que le
Conseil prolonge la période de déclaration pour l’année 6 des opérations de la
collecte de déchets solides par la ville au 27 octobre, 2012.
DOCUMENTATION :
1.
Deputy City Manager, City Operations report dated 25 April 2012 (ACS2012 COS-ESD-0003);
Comité de
l'environnement
and Council /
et au Conseil
April 25, 2012 / le 25 avril 2012
Submitted
by/Soumis par: Steve Kanellakos, Deputy City Manager/
Directeur
municipal adjoint, City Operations/Opérations municipales
Contact Person/Personne ressource : Dixon Weir, General Manager
Environmental
Services/Services environnementaux
(613) 580-2424 x22002, dixon.weir@ottawa.ca
1.
That the
Environment Committee recommend Council receive this report for
information.
2. That the Environment Committee recommend
Council extend the reporting period for year 6 of the In-house Collection
Operations to October 27, 2012.
1. Que le Comité de l’environnement recommande au Conseil de prendre
connaissance de ce rapport.
2. Que le Comité
de l’environnement recommande au Conseil de prolonger la période de déclaration
pour l’année 6 des opérations de la collecte de déchets solides par la ville au
27 octobre, 2012.
In 2006, City Council approved and awarded a
six-year collection contract for Zone C3 (urban core) to City staff. As part of the approval of the In-house bid,
staff was tasked to report back annually with financial and operational
performance results.
The In-house collection for Zone C3
resulted in an operating surplus for 2011 of $600,582 as reflected in the
Statement of Operations submitted by the City’s external auditor Ernst &
Young attached as Document 1 to this report.
The In-house bid has also resulted in contractual savings, attributable
to the City’s bid price compared to the next closest bid, in the amount of
$664,932 in 2011, resulting in total 2011 costs savings of $1,265,514.
The In-house contract has resulted in
cumulative operating surpluses of $1,811,074 and contract savings of $4,256,631
over the 5 year life of the contract resulting in overall savings of $6,067,705
since inception of the in-house contract.
In terms of customer service requests,
the In-house bid yielded 1.38 calls per 1,000 households in 2011 versus the
city average of 1.01. This higher
average is attributable to historically higher waste related service requests
in the urban core of the City as well as well as an under reporting of calls to
311 related to the contracted service providers as many homeowners call the
contractor company directly.
En 2006, le Conseil
municipal approuvait l'octroi d'un contrat de six ans pour la collecte des
déchets dans la Zone 3 (centre-ville) aux employés de la Ville. Dans le cadre
de l'approbation de la soumission interne, on demandait au personnel de
soumettre un rapport annuel sur les résultats du rendement financier et
opérationnel.
La collecte interne pour la Zone 3 a entraîné un excédent d'exploitation
pour 2011 de 600 582 $, comme indiqué dans l'état des résultats
d'exploitation d'Ernst & Young, vérificateur externe de la Ville, dont un
exemplaire est joint au présent rapport en tant que Document 1. La soumission
interne a aussi permis de réaliser des économies contractuelles, attribuables à
la différence entre le prix de la soumission de la Ville et le prix de la deuxième
soumission, qui représentaient 664 932 $ en 2011, portant les
économies de coûts totales pour 2011 à 1 265 514 $.
Le contrat interne a permis de réaliser des excédents d'exploitation
cumulatifs de 1 811 074 $ et des économies contractuelles de
4 256 631 $ au cours de la durée du contrat de cinq ans, ce qui
représente des économies globales de 6 067 705 $ depuis l'octroi
du contrat interne.
En termes de demandes de service des clients, la soumission interne a
donné lieu à 1,38 appel par tranche de 1 000 foyers en 2011,
comparativement à la moyenne pour la ville de 1,01. Cette moyenne plus élevée
est attribuable au fait que les demandes de service relatives à la collecte des
déchets sont toujours plus élevées au centre-ville d'Ottawa et aussi au nombre
moindre d'appels 311 associés aux fournisseurs de services contractuels, car
plusieurs propriétaires de maison appellent la société prestataire directement.
City of Ottawa Council approved and awarded
one zone (Zone C3) of the six-year collection contract (June 2, 2006 through
May 31, 2012) to City Staff (hereafter referred to as “In-house collection
group”) following a managed competition process that was overseen by a fairness
commissioner.
In approving the use of the In-house collection
group for Zone C3, Council also approved:
“That Council require an annual audit
of expenditures for works awarded to the City, that Council require an annual
information report, qualitative and quantitative in nature, relevant to this
program, as suggested by the City Internal Auditor, and that such reports
follow the usual Committee process.”
This report
presents both the audited financial statement for the 12 months ending May 31,
2011, and the Department’s performance report.
Both the financial statement and performance report are the
responsibility of management. The
Auditor’s responsibilities are discussed in each section.
On April 15,
2011, Council approved the extension of the current collection contracts to
October 27, 2012. Therefore, staff are requesting that the next reporting
period for the In-house Collection Operations be extended accordingly. As such,
the next reporting period, which will be the last for this contract term, will
be from June 1, 2011 to October 27, 2012.
Financial
Results
As in prior years, the methodology
used by management to prepare the financial statements is consistent with the
Managed Competition Protocol and the Internal Auditor’s Report on incremental
costs approved by the former Regional Council in 1998. There are four fundamental concepts used in
preparation of the In-house collection statements:
1.
this is a “going concern” operation;
2.
this is a unit-based contract;
3.
expenditures and revenues are recorded on an
accrual basis; and,
4.
all incremental costs are included.
The Statement of Operations of the
In-house collection group for the 12 months ended May 31, 2011, was audited by
Ernst & Young LLP, the City’s external auditor. Their audit was designed in accordance with the
Generally Accepted Auditing Standards.
The Statement of Operations and the Auditor’s Report are provided in
Document 1.
The In-house collection for Zone C3
resulted in an operating surplus for Year 5 of $600,582 and a cumulative
operating surplus to residents of $1,811,074 since the contract started in
2006.
Table 1 below presents the current and
total contractual, operational and overall savings to area residents achieved
by the In-house collection group. The
contract is structured to be paid at the bid unit rate for the actual tonnage
collected.
Table 1: Financial
Performance of the In-house Collection Group
|
Contractual Savings and Overall Savings to Residents |
|||||
|
Year 1 & 2 |
Year 3 |
Year 4 |
Year 5 |
Total |
|
|
2006-2008 |
2008-2009 |
2009-2010 |
2010-2011 |
||
|
Savings from City Bid (1) |
$2,079,336 |
$731,338 |
$781,024 |
$664,932 |
$4,256,631 |
|
In house operations |
$262,391 |
$(10,020) |
$(103,018) |
$197,274 |
$346,627 |
|
Cost avoidances |
$490,823 |
$253,302 |
$317,014 |
$403,308 |
$1,464,447 |
|
Surplus from in-house collection operations (2) |
$753,214 |
$243,282 |
$213,996 |
$600,582 |
$1,811,074 |
|
Total Savings (1 + 2) |
$2,832,550 |
$974,620 |
$995,020 |
$1,265,514 |
$6,067,705 |
Total
savings are a combination of the following: (1) savings as a result of the
City’s bid price compared to the next closest bid, adjusted to reflect actual
tonnages of residuals, recyclables and source separated organics collected, and
(2) savings as a result of actual costs of the operation compared to the City’s
bid price allocation as per the attached audited Statement of Operations in
Document 1. Table 1 reflects that the surplus
from in-house collection operations is a combination of the performance of the In-house
Operations and the cost avoidances that were included in the City bid. These cost avoidances are not incremental to
the City and, therefore, not included in the Statement of Operations prepared
by the external auditor. The current In-house contract has resulted in total savings
of $6,067,706 over the 5 years of the contract.
Year
5 In-house operations savings result from the efficient route optimization, and
the productivity of dedicated and experienced staff.
Performance
Results
In
addition to the audited Statement of Operations for the In-house collection
group, management prepares an annual report on the performance of this contract
for Committee and Council. The performance report includes both quantitative
and qualitative assessments identified for the program. Ernst & Young LLP has reviewed the
performance information to ensure it was prepared on a consistent basis with
prior years and accurately reflects the result of operations for Year 5.
On-going
qualitative analysis is conducted to ensure that residents receive the appropriate
service level and that costs related to their response are minimized. If a resident calls 3-1-1 with a service call,
a work order is issued to the appropriate contractor for resolution. Monthly reports are prepared for each service
provider, including the In-house collection group, illustrating their
performance and assisting in identifying trends that require attention.
Table
2 - Solid Waste Collection – Customer Service
Requests
|
Call Type |
In-House Services Zone C3 |
Contracted Service |
City Total |
||
|
# of calls |
% of calls |
# of calls |
% of calls |
# of calls |
|
|
Black Box collection |
281 |
17.6% |
1,312 |
82.4% |
1,593 |
|
Blue Box collection |
245 |
17.4% |
1,166 |
82.6% |
1,411 |
|
Garbage collection |
770 |
22.0% |
2,726 |
78.0% |
3,496 |
|
Leaf & Yard collection |
446 |
31.9% |
952 |
68.1% |
1,398 |
|
Organics |
1,493 |
23.9% |
4,746 |
76.1% |
6,239 |
|
Total Calls/year |
3,235 |
22.9% |
10,902 |
77.1% |
14,137 |
|
Households (2011 data) |
45,045 |
16.8% |
223,060 |
83.2% |
268,105 |
|
Average daily Service Requests per 1,000 households |
1.38 |
|
0.94 |
|
1.01 |
The organics collection service
commenced mid-contract year in Year 4 (January 1st 2010 to May 31st
2010). The Year 5 contract period was the first contract year with organics
collection for a full calendar period. As a result, the total number of calls
for all zones increased. The percentage of calls reported for Blue and Black
Box collection for Zone 3 (In-House Zone) decreased when compared to contract
Year 4. The call percentages for garbage collection remained constant.
In November
2010, during the fall peak leaf and yard waste season, Zone 3 (In-House Zone)
experienced operational issues with organics and leaf and yard waste
collections which resulted in higher percentage of calls received. These operational
issues were addressed and this was reflected in a reduction in call volumes
during the spring 2011 peak lead and yard waste season.
In Year 5, the In-house collection
group received an average of 1.38 calls per 1,000 homes per day or 72 calls per
1,000 homes/year. The main reasons for the higher call volume are:
1. The In-house
collection group provides service in the urban core where calls related to
property standards and waste issues are historically higher than in suburban
and rural areas; and,
2. Many
homeowners in the areas serviced by external contractors call the contractor
providing service directly, rather than the City’s call centre, to have
complaints resolved, resulting in a lower call volume to 3-1-1 for contracted
services.
RURAL
IMPLICATIONS
There
are no rural implications from this report.
This
report was prepared in collaboration with the Financial Services ISCS Unit and
the Solid Waste Services branch.
COMMENTS
BY THE WARD COUNCILLOR
Councillors
for the affected wards were not consulted as this report is for information
only.
There
are no legal impediments to receiving the information in this report and to
implementing the recommendation in the report.
RISK
MANAGEMENT IMPLICATIONS
There
are no risk management implications associated with this report.
There are no financial implications associated
with this report.
There
are no accessibility impacts associated with this report.
There
are no technical implications associated with this report.
This
report is in accordance with the Service Delivery priority to “Deliver agreed
to level of service at the lowest possible cost.”
Document 1 Statement
of Operations – City of Ottawa In-house Waste Collection – For the Twelve
Months Ended May 31, 2011
City
Council to receive this report for information.