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REPORT RAPPORT |
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REPORT RAPPORT |
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DATE:
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19 July 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 - SECOND 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). The accuracy of this projection improves with each quarter as the Service’s expense and revenue patterns become more certain. The First Quarter Financial Status Report was received by the Board in April. At that time, a small deficit for 2011 was projected.
DISCUSSION
At the end of the second quarter, the OPS is currently projecting a break-even financial position for the 2011 fiscal year. The budget pressure caused by fuel prices, which was identified in the first quarter, continues into the second quarter. There are also additional budget pressures in alarm revenue, and insurance claims costs. These pressures are offset by surpluses in overtime and court time, vehicle maintenance expense, increased volume of paid duty services and other revenue. 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 |
( 0.6) |
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Insurance Claims & Settlements |
( 0.2) |
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WSIB Costs |
(0.1) |
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Evidence Disposal Project |
0.4 |
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Paid Duty & Other Revenue |
0.2 |
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Major Collision Investigation Recovery |
0.1 |
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Overtime Surplus |
0.1 |
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Vehicle Maintenance Costs |
0.1 |
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2011 Operating Surplus / (Deficit) |
($0.0) |
Identified Pressures
a) Fuel Prices
The Ottawa Police Service’s 2011 Operating Budget for fuel was estimated using a retail pump price of $1.00/litre, based on guidance provided by the City of Ottawa. This amount is reduced to an effective price of $0.85/litre, after accounting for tax exemptions and discounts through the fuel card program. The budget of $2,382,700 is based on a consumption of 2.7 million litres of fuel for 2011.
The average retail price for regular unleaded gasoline at Ottawa-area self-service filling stations is outlined in Table 2, which shows monthly averages well above the budgeted per litre price:
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Table 2 |
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Average Retail Price of Gasoline |
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Source: Statistics Canada (http://www40.statcan.ca/l01/cst01/econ152g-eng.htm)
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Month |
Average Retail Price |
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January 2011 |
$1.143 |
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February 2011 |
$1.140 |
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March 2011 |
$1.210 |
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April 2011 |
$1.278 |
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May 2011 |
$1.283 |
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Based upon fuel and consumption information available near the end June 2011, the updated deficit projection ranges from $525,000 to $600,000. Staff are currently examining various mitigating strategies to address this projected deficit. For more details about these strategies, please review the “Budget Pressures – Fuel Costs” report which was presented to the Ottawa Police Services Board on June 27th.
b) Insurance Claims & Settlements
The OPS had a large settlement from an older insurance claim dating back to 2000 in the amount of $450,000. The insurer covered a portion of this settlement ($250,000) leaving the OPS to cover the remaining $200,000. In previous years large settlements were charged to the general City account for claims. However, this specific settlement was charged to the OPS accounts. We have had some discussions with the City to transfer some of the budget base that resides in the City portion of the budget to Police accounts. We will report back on this in the next quarter, which may result in a reduction in this budget pressure.
c) 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 over the past 4 years and although adjustments to the budget were made in these years to gradually increase the base to $1.5 million, the actual costs for 2010 were in the $1.6 million range. This may result in a budget pressure of $0.1 million based on current expenditures.
d) Evidence Disposal Project and Related Activities
As part of a comprehensive review of our Evidence Control Section (ECS) operations, staff are working diligently to reduce the quantity of evidence at the Swansea facility that is past its disposal date. The Board approved funding in the 2011 budget for additional term employees to deal with this backlog of disposal items. Disposal of property and evidence is conducted in accordance with judicial orders and through auction or public tender as outlined in Section 132 of the Police Services Act. In accordance with Board policy, proceeds are being applied towards the operating budget.
The disposal project is yielding significant results. The one-time revenue resulting from the disposal of the back-log of property and evidence is expected to be in the range of $400,000.
e) Paid Duty & Other Revenue
Staff have 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 and this has continued in 2011.
f) Major Collision Investigations
The Board approved an increase in fees for the release of documents and data relating to Major Collision Investigations at its meeting on 24 May 2011. As indicated in that report, the estimated amount of fees generated would be $297,000, based on the 2010 volume of requests. Given a partial year of activity, revenue for 2011 is expected to be $150,000.
h) Overtime Costs
As of the end of May, overtime and court overtime is projecting a combined $142,000 surplus. That surplus will likely be reduced by a $25,000 pressure from the new schedule changes for Collision Investigators and from overtime related to Canada Day which is likely to exceed budget estimates due to the Royal visit. The first quarter pressure of $80,000 identified due to the supplemental cell block training is currently being offset mainly by the $85,000 budget that was created for general block training which is coming in at much less than anticipated.
i) Vehicle Maintenance
Vehicle maintenance has provided surpluses in past years and information for the first three (5) 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.
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) 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, although results during the second quarter have been positive.
b) Retirement Costs
There were a large number of retirements during the first half of the year. In addition, benefit costs have been increasing at a rate much higher than the rate of inflation. A budget pressure is not forecast at this time. However, if there continues to be increased retirements and the analysis of actual benefit costs results in a supplementary payment (which occurs at year end), this may result in a deficit in this area.
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 the 2nd Quarter Financial Report – Summary By Directorate;
§ 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. Annex C 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 achieve a 2011 break-even financial position based on operating results to the end of the second quarter.
In October, staff will present to the Board the next quarterly report on the Service’s financial position as at 30 September 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)
Gilles Larochelle
Acting Chief of Police
Attach (3): Annex A: Second Quarter Financial Report Summary by Directorate
Annex B: Purchase Orders Issued Under Delegated Authority
Annex C: Capital Budget Works in Progress
