REPORT RAPPORT

DATE:	18 October 2011
TO/DEST:	Executive Director, Ottawa Police Services Board
FROM/EXP:	Acting Chief of Police, Ottawa Police Service
SUBJECT/OBJET:	FINANCIAL STATUS REPORT - THIRD QUARTER 2011

RECOMMENDATION

That the Ottawa Police Services Board receive this report for information.

BACKGROUND

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 Second Quarter Financial Status Report was received by the Board in July. At that time, a break-even position for 2011 was projected.

DISCUSSION

At the end of the third quarter, the OPS continues to project a break-even financial position for the 2011 fiscal year. The budget pressures identified in the first two quarters relating to fuel prices, insurance claims costs, and WSIB costs continue in the third quarter. These pressures are offset by surpluses in various revenue and recoveries including the increased volume of paid duty services and alarm revenue, as well as small positive variances in overtime and vehicle maintenance.

Each of these significant variances is summarized in Table 1 and discussed in more detail below.

Table 1 Ottawa Police Service 2011 Projected Year End – Significant Variances
Item	$ Millions
Fuel Costs	( 0.7)
Insurance Claims & Settlements	( 0.3)
WSIB Costs	( 0.1)
Evidence Disposal Project	0.4
Paid Duty & Other Revenue	0.4
Overtime Surplus	0.1
Alarm Revenue	0.1
Vehicle Maintenance Costs	0.1
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, which aligns with the City of Ottawa budget assumptions. 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 $1.00 per litre price, ranging between a low of $1.14 in February to a high of $1.28 in June.

Table 2
Average Retail Price of Gasoline - 2011
Month	Average Retail Price
January	$1.143
February	$1.140
March	$1.210
April	$1.278
May	$1.283
June	$1.250
July	$1.271
August	$1.256
Source: Statistics Canada(http://www.statcan.gc.ca/pub/62-001-x/62-001-x2011008-eng.pdf )

As at the end of September 2011, the updated deficit projection for fuel ranges from $550,000 to $700,000. Staff has examined various mitigating strategies to address this projected deficit, including the purchase of anti-idling technology to help reduce fuel consumption and/or offsetting it with revenue generated from the Evidence Disposal project, for example. Details about these and other strategies were presented to the Police Services Board on June 27, 2011 under report titled "Budget Pressures - Fuel Costs".

b) Insurance Claims and Settlements

The OPS was required to make a large settlement related to 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 these settlements were expensed through the general City account for claims. However, the City changed this practice in 2011 and is now billing settlement costs to the OPS claims account. To recognize this new approach, a budget adjustment was made to transfer budget base in the amount of $464,811 from the City to the Police budget for 2011. With this adjustment also came actual expenditures that slightly exceeded the budget, leaving us with a projected deficit of $0.3 million.

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 four (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 is 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 has projected a net $0.4 million surplus in various revenue and recovery accounts including revenue from paid duty, which accounts for the majority of this surplus. 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) Overtime Costs

As of the end of August, staff is projecting that overtime and court overtime will have a combined surplus of $194,000. The increase over the 2^nd Quarter reported surplus projection of $142,000 is due to surpluses in overtime for June, July and August. Although the overtime relating to Canada Day was $56K higher than budget, there was a surplus of $27K for July overall. The projected surplus will likely be reduced by a $25,000 pressure from the new schedule changes for Collision Investigators, which recognizes on-call pay. The $80,000 first quarter pressure that was identified due to the supplemental Cell Block training is currently being offset mainly by the $85,000 that was budgeted for Block Training, which is much less than originally estimated.

g) Alarm Revenue

In past years, the OPS experienced shortfalls in false alarm revenue as a result of the declining volume of false alarms and the budget was adjusted to reflect this trend. The volume of false alarms continues its steady decline, with an almost 5% reduction in the past year. In June 2010 the Police Services Board approved the false alarm fee increase to $130, to better reflect the cost of attending the call. This change has offset the decline in revenue, and in 2011 a small surplus is being projected.

h) Vehicle Maintenance

The vehicle maintenance account has provided surpluses in past years and information for the first eight (8) months of this year indicates that this trend has continued and will likely result in a surplus at year end 2011. This surplus is attributable to the Board-approved funding of the capital replacement plan along with responsible vehicle management, which continues to allow older vehicles to be replaced prior to incurring significant maintenance costs and the rotating of vehicles to maximize their usage.

Horizon Issues

At this time, there are no significant operational issues to report that would have a material impact on the Service’s financial position at 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 the Third 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.

CONSULTATION

Not applicable.

FINANCIAL IMPLICATIONS

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 third quarter.

Financial Services staff will continue to monitor the Service’s financial position and will provide a report to the Board in the Fourth Quarter Financial Report on the final year-end financial position.

(Original signed by)

Charles Bordeleau

Acting Chief of Police

Attach (3):

Annex A: Third Quarter Financial Report Summary by Directorate

Annex B: Purchase Orders Issued Under Delegated Authority

Annex C: Capital Budget Works in Progress