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REPORT RAPPORT |
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REPORT RAPPORT |
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DATE:
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26 April 2011 |
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TO/DEST:
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Executive Director, Ottawa Police Services Board |
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FROM/EXP:
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Chief of Police, Ottawa Police Service |
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SUBJECT/OBJET:
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ANNUAL FINANCIAL REPORT: 2010
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RECOMMENDATION
The 2010 Fourth Quarter Financial Report presents the year-end financial position of the Ottawa Police Service (OPS) and outlines the operational issues that have affected the Police Service’s finances in 2010. These results are subject to external audit and focus on OPS operations only.
DISCUSSION
Summary
The Ottawa Police Service ended 2010 with an operating surplus of $1.9 million. As well, an additional $1.7 million surplus has been allocated to the OPS from the City of Ottawa. This allocation is the OPS share of the tax account surplus for 2010. As a result, the combined total surplus is $3.6 million for 2010.
The $1.9 million operating surplus is primarily due to savings on retirement costs. Additionally, there were surpluses in overtime and court overtime costs, paid duty services, facility costs, vehicle maintenance expenses, the Olympic Deployment recovery and other revenue. These surpluses were partially offset by budget pressures in the areas of compensation, WSIB, disallowed amounts resulting from the audit of cost recoveries relating to the U.S. Presidential visit, legal fees, fuel costs, Bill 168 project costs and alarm revenue.
Disposition of Surplus
The 2010 surplus will be allocated to fund previously-approved projects that are ineligible for debt-financing. This issue was identified to the Board at the special meeting of the PSB held on 19 January 2011 to table the 2011 Draft Operating and Capital Budgets.
Staff reported that, following discussions with City of Ottawa finance staff, $7.4 million of previously-approved capital projects were identified as being ineligible for debt financing. The Board’s approved plan to solve this matter had two elements: 1) the forecasted 2010 surplus of $2.0 million (Jan 2011 estimated); and 2) increasing pay-as-you-go funding of $5.4 million.
At the City’s Finance and Economic Development Committee meeting held on 4 April 2011, the Committee approved the recommendation to Council for the disposition of the 2010 tax supported operating surplus, which included applying the total $3.6 million OPS surplus from 2010 towards this ineligible debt amount. The report states:
The Police operating surplus of $3.6 million will be transferred to the City Wide Capital Reserve Fund and will be available to help refinance capital projects which are not debt eligible.
This positive action by the Committee will help to reduce the requirement for pay-as-you-go funding from $5.4 million to $3.7 million.
Table 1Ottawa Police Service2010 Year End – Significant Variances |
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Item |
$ Millions |
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Retirement Costs & Benefits |
1.50 |
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Paid Duty & Other Revenue |
0.50 |
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Police Facilities Costs |
0.50 |
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Olympic Deployment Recovery |
0.40 |
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Overtime & Court Time Surplus |
0.30 |
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Vehicle Maintenance |
0.10 |
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Compensation / Hiring Plan |
(0.40) |
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Allowance For Audit – Presidential (Obama) Visit Costs |
(0.35) |
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WSIB |
(0.20) |
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Legal Fees |
(0.15) |
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Fuel Costs |
(0.10) |
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Bill 168 Costs |
(0.10) |
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Alarm Revenue |
(0.10) |
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2010 Operating Surplus / (Deficit) |
$1.90 |
Significant Variances
a) Retirement Costs & Benefits
Each of the significant variances giving rise to the $1.9 million operating surplus is summarized in Table 1 and discussed in more detail below. The 2010 budget for retirement costs was formulated around an estimate of 50 sworn members retiring in 2010 based on OMERS eligibility criteria, but only half of that number actually retired. The Third Quarter financial report projected a surplus in the retirement account; accordingly, the Board directed OPS staff to pursue options to reduce the future liability of retirement payments. Agreement was not reached with the Association on this matter, leaving a net $1.5 million surplus in retirement costs.
b) Paid Duty and Other Revenue (includes High Tech Crime Unit Grant/Recovery)
A net $0.5 million surplus occurred in various revenue and recovery accounts including revenue from paid duty and a recovery through a provincial grant. One of the grants received from the Ministry of Community Safety and Correctional Services is for the “Provincial Strategy to Protect Children from Sexual Abuse and Exploitation on the Internet”, which helped to offset some of the OPS costs for these operations.
c) Police Facility Costs
Building Operations generated savings of approximately $0.5 million in 2010 due to the following:
• lower than expected utility costs (water, gas & hydro).
• lower than expected tender submissions for several contracts in 2010
• reduced compensation costs as several vacant city positions remained unfilled, or were filled mid-year, during 2010.
d) Olympic Deployment Recovery
The OPS recovered $0.4 million for the salaries and benefits of officers seconded to work at the 2010 Vancouver Olympics as per an agreement with the RCMP. The OPS assigned 61 officers in February and March of 2010 to the Olympics, with a few officers deployed as early as January.
e) Overtime and Court Overtime Costs
There was a $0.2 million surplus in overtime costs for 2010. Earned hours of overtime have decreased by 21% for 2010 as compared to 2009. Overtime earned in the year was $2.7 million, excluding recoverable overtime for events such as the Olympic deployment. There were ten homicides in 2010 compared to nine in 2009. However, there was $650,000 of overtime incurred due to the Tamil demonstrations in 2009. A surplus of $0.1 million was recorded for court overtime costs.
f) Vehicle Maintenance
There was a year-end surplus of $0.1 million in vehicle maintenance costs, as had been projected. This is attributable to the Board-approved funding of the capital replacement plan, which allows older vehicles to be replaced prior to incurring significant maintenance costs.
g) Compensation/Hiring Plan Costs
As explained in the previous quarterly reports, the annual Hiring Plan is based on forecasts relating to retirements, resignations and operational backfill requirements for the coming year, and is reviewed and modified as needed.
As in prior years, and when resources permit, the hiring plan will temporarily result in staffing levels in late Q4 of each year to be higher than the budgeted complement. This plan will ensure that OPS has a sufficient number of “road ready” officers to meet the operational demands in the early part of the following year. In developing the hiring plan, three key factors are considered:
1. A new recruit takes nine (9) months on average to become deployable;
2. The Ontario Police College only holds three (3) training sessions per year for new recruits with limited space in each class; and
3. Retirements tend to occur at the beginning of each new fiscal year.
In considering these three factors, the hiring plan for 2010 resulted in being temporarily over complement at several points throughout the year and at year-end, with an associated budget pressure for compensation of approximately $0.4 million. This pressure is partially due to the lower than expected retirements in 2010. The over complement position will be rectified in the first few months of 2011 as a result of the third factor mentioned above.
h) Allowance For Audit – Presidential (Obama) Visit Costs
As was reported in the Horizon Issues in the Third Quarter Financial Status report, discussions with the federal auditor and the final audit report on the expenditures for the Obama visit indicated that costs relating to the Planning Team, which are in the range of $0.35 million, were not recoverable. Since this amount was already booked as a receivable in 2009, an expense has been added to 2010 to reflect that these costs will not be recovered. OPS staff members are continuing discussions with relevant federal officials to review the auditor’s decision.
i) WSIB Costs
Included in compensation costs for the OPS are the costs relating to WSIB (Workplace Safety & Insurance Board). The costs in this area have increased significantly over the past 4 years and although adjustments to the budget were made in 2009 and 2010 to increase the base to $1.4 million, the actual costs for 2010 are in the $1.6 million range. This has resulted in a budget pressure of $0.2 million.
j) Legal Fees
A deficit of $0.2 million in legal costs is attributable to legal services required from external legal counsel for prosecutions under the Police Services Act, indemnification costs as provided for in the Police Service Collective Agreement, along with costs related to SIU investigations. These pressures were identified in the 2011 budget with an efficiency identified through the use of in house legal services for more prosecutions, to hopefully bring costs within the budget.
k) Fuel Prices
The 2010 budget for fuel assumed an average retail price of $0.92/litre and an anticipated yearly consumption volume of 2.9 million litres. The assumed net price is $0.81/litre, after factoring tax rebates, efficiency calculations and the vendor discount. As anticipated in the Third Quarter Financial Status report, fuel prices did increase in the latter part of the year. Accordingly, the average net price of fuel in 2010 was $0.89/litre. Even with a lower than expected volume of litres consumed, a budget deficit of $0.1 million resulted due to the price difference of $0.08/litre.
l) Bill 168 Costs
Changes to Ontario’s Occupational Health and Safety Act (OHSA) – effective June 15 2010 – strengthened protections for workers from workplace violence and address workplace harassment. The implementation of these changes in 2010 had a $0.1 million cost impact to the OPS. These costs arose as the Human Resources Section ensured the completion of risk assessments, introduced a new Workplace Violence Policy and provided training and education to its membership, as required under Bill 168 amendments to the Act.
m) Alarm Revenue
In each of the past three years, the OPS experienced a shortfall in false alarm revenue in the range of $0.2 million to $0.3 million annually as a result of the declining volume of false alarms. Budget reductions have been made each year to reflect this trend. Alarm registration fees were eliminated in 2010 in favour of an increase in the false alarm fee to $130 to reflect the cost of attending the call. This changed has helped to reduce the decline in revenue. Nevertheless, the shortfall at year-end was $0.1 million. On a positive note, the increased false alarm fee may be having an unintended effect and is helping to maintain a steady decline in the volume of false alarms.
Reporting Requirements
Section 2(e) of the Board’s Policy BC-2 on Monitoring Requirements requires the Chief to provide the Board with information on specific operational issues. With respect to financial reporting these requirements include:
§ Annex B, which provides a list of all contracts awarded by the Chief that exceed $25,000;
§ Annex C, which provides a summary of the OPS capital budget works in progress. As per the Financial Accountability Procedures Manual Section 3.1.3.4, the Director General may close capital projects by returning any remaining balance to the originating sources and fund any deficits. This Annex also indicates which projects are being closed and the money returned to source or any deficits funded from same.
Not applicable.
FINANCIAL STATEMENT
There are no financial implications.
CONCLUSION
The Ottawa Police Service surplus on operations for 2010 is primarily due to the lower than expected costs of retirements of $1.9 million. An additional $1.7 million of surplus tax account funds has been allocated to OPS from the City, bringing the total 2010 surplus to $3.6 million. On 5 April 2011, the City’s Finance and Economic Development Committee approved the recommendation to Council for the disposition of the total $3.6 million surplus to be used to help finance approved OPS capital projects which are not debt eligible. This strategy is consistent with the approach adopted by the Board during the 2011 budget process. It ensures that the Board’s obligation in this area will be finalized in a responsible way.
(Original signed by)
Vern White
Chief of Police
Attach. (3)
Annex A: Fourth Quarter Financial Report Summary by Directorate
Annex B: Purchase Orders Issued Under Delegated Authority
Annex C: Capital Budget Works in Progress
