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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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FINANCIAL STATUS REPORT - FIRST QUARTER 2011
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RECOMMENDATION
The quarterly financial report summarizes the current financial position of the organization, outlines the operational issues affecting the Service’s finances and presents the projected year-end financial position for Ottawa Police Service (OPS). This report presents an initial projection of the Service’s year-end financial position and outlines the significant variances that are known at this time. The accuracy of this projection improves with each quarter as the Service’s expense and revenue patterns become more certain.
DISCUSSION
At this time, the OPS is projecting an overall deficit for the 2011 fiscal year of $300,000. This deficit is primarily due to high fuel costs. Based on the current price levels for fuel, the OPS is forecasting that fuel costs will be $500,000 over the budgeted amount for 2011. A portion of this budget pressure may be offset by potential savings in paid duty revenue and various other revenue accounts. Each of these significant variances is summarized in Table 1 and discussed in more detail below.
Table 1Ottawa Police Service2011 Projected Year End – Significant Variances |
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Item |
$ Millions |
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Fuel Costs |
( 0.5) |
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Paid Duty & Other Revenue |
0.2 |
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2011 Operating Surplus / (Deficit) |
($3.0) |
Identified Pressures
a) Fuel Prices
The fuel budget was developed around a pump price of $1.00/litre and a volume of 2.7 million litres of fuel. The price that OPS actually pays for fuel is $0.85/litre, when tax exemptions and discounts are taken into account.
During the first quarter of 2011, the pump price of fuel has been close to $1.30/litre on average, or a net price of $1.01/litre for OPS. As it currently stands, analysts in the oil and gas industry are divided as to the direction fuel prices will take over the next nine months. Some analysts see a continuing Middle East crisis that will only maintain the upward pressure on prices, but others anticipate a decline in prices towards the later part of the year as supply and demand forces take effect. Without any certainty in the market, it is difficult to determine what will happen. If the pump price of $1.30/litre continues for the remainder of the year, it is anticipated that the Service will experience a budget deficit of approximately $0.5 million for fuel.
Fleet Services is working hard to mitigate the upward pressure on the price of fuel by expanding their anti-idling technology in order to reduce overall fuel volume. It is, however, too early in the year to determine the impact and, at this time, we are still expecting to end the year with a deficit on fuel costs. Staff will be monitoring the impact of anti-idling practices on fuel consumption.
b) Paid Duty & Other Revenue
Staff has projected a net $0.2 million surplus in various revenue and recovery accounts including revenue from paid duty. Although there has already been an upward adjustment to the revenue in these accounts, the OPS has consistently experienced a surplus in this area largely due to one-time City requests.
There are a number of operational and other issues underway that, though not yet quantifiable, may have a material impact on the Service’s financial position at year-end. They are discussed below:
a) Overtime Costs – Cell Block Training
Overtime costs are being identified as a potential pressure due to the supplemental cell block training that was done on an overtime basis during the first quarter. The overtime cost for that training is approximately $80,000 for both the trainees and trainers. It is expected this pressure may be offset in overtime savings in other areas and will be reported on in the second quarter.
b) Vehicle Maintenance
Vehicle maintenance has provided surpluses in past years and information for the first three (3) months indicates that this trend will continue in 2011. This surplus is attributable to the Board-approved funding of the capital replacement plan, which continues to allow older vehicles to be replaced prior to incurring significant maintenance costs.
c) Alarm Revenue
The steady decline in the number of false alarms over the past four years has resulted in a shortfall in false alarm revenue in the range of $0.2 to $0.3 million. Budget adjustments have been made to address a portion of this shortfall. Further, in 2009, the registration fee was eliminated. An increase in the false alarm fee to $130 in the second quarter of 2010, which better reflects the cost of attending the call, has assisted in reducing the revenue shortfall. A small budget deficit in this area may still result despite budget adjustments.
d) Retirement Costs
There were an unusually large number of retirements during the first quarter. A budget pressure is not forecast at this time however, if the trend of increased retirements continues, this may result in a deficit in this area by year end.
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 A, which provides a list of all contracts awarded by the Chief that exceed $25,000;
§ Annex B, 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. Annex B also indicates which projects are being closed and the money returned to source or any deficits funded from same.
Not applicable.
There are no financial implications.
CONCLUSION
The Police Service is forecasting that it will experience a budget shortfall of $300,000 for 2011 based on operating results to the end of the first quarter. Staff are developing a plan to deal with this shortfall and will report on the plan at the next board meeting.
In July, staff will present to the Board the next quarterly report on the Service’s financial position as at 30 June 2011. It will provide an update on the above-noted issues, identify new pressures or solutions that have emerged, and the year-end forecast will be adjusted accordingly.
(Original signed by)
Vern White
Chief of Police
Attach (2): Annex A: Purchase Orders Issued Under Delegated Authority
Annex B: Capital Budget Works in Progress
