REPORT RAPPORT

DATE:	23 April 2012
TO/DEST:	Executive Director, Ottawa Police Services Board
FROM/EXP:	Chief of Police, Ottawa Police Service
SUBJECT/OBJET:	FINANCIAL STATUS REPORT - FIRST QUARTER 2012

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).  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

This report presents a projection of the Service’s year-end financial position and outlines the significant variances that are known at this time providing both pressures and solutions within a given range. As there is uncertainty with respect to the magnitude and likelihood of these items at this time, staff has identified a breakeven position and a best case scenario of $400,000 surplus.  The outcome is highly dependent on the arbitrator’s decision on the 2011 salary award and the impact of the various pressures and solutions identified.

To date, the projected pressures include fuel and overtime costs.  The potential solutions include paid duty and various other revenue accounts, as well as savings in fleet maintenance costs.  Each of these significant variances is summarized in Table 1 and discussed in more detail below.

Table 1 - Ottawa Police Service 2012 Projected Year End – Significant Variances
Pressures	Low ($000)	High ($000)
Fuel Costs	(100)	(525)
Overtime & Court Time Costs	0	(350)
Total Pressures	(100)	(875)
Solutions
Paid Duty & Other Revenue	300	575
Alarm Revenue	100	150
Vehicle Maintenance	100	150
Total Solutions	500	875
Projected  Surplus  (Deficit)	400	0

Identified Pressures & Solutions

a)    Fuel Costs

The Ottawa Police Service’s 2012 fuel budget was developed using a retail pump price of $1.25/litre.  This amount was reduced to an effective price of $1.07/litre, after accounting for tax exemptions and discounts through the fuel card program.  The budget of $3.0 million was based upon a consumption level of 2.8 million litres of fuel for 2012.

The average retail price for regular unleaded gasoline at Ottawa-area self-service filling stations is outlined in Table 2.   For the first two months of the year, it was $1.21 and $1.24 per litre respectively, and registered below the budgeted level of $1.25.

Table 2
Average Retail Price of Gasoline Per Litre - 2012
Month	Average Retail Price
January	$1.218
February	$1.240
March	Not Yet Available
Source: Statistics Canada (http:// http://www.statcan.gc.ca/pub/62-001-x/2012012/t047-eng.htm- Table 13)

However, some industry analysts are projecting continued upward pressure on fuel prices due to supply chain uncertainty stemming from the current political instability in the Middle East and Northern Africa. Accordingly, staff is anticipating a continual increase in the pump price for the rest of the year, resulting in a projected $525,000 deficit in the fuel account for 2012 based on a worst case pump price of $1.50 per litre. 

Staff will be watching the trend in gasoline prices very closely over the balance of the year and will continue to further refine the projection for the fuel account for 2012.  The impact of the expanded idle reduction program on fuel consumption will also be monitored.

b)    Overtime & Court Time Costs

Across the country, police services are anticipating that the year will be characterized by protests sparked by the ‘Occupy Movement’.  There have already been some smaller Congolese demonstrations in 2012.  Additionally, the Israeli Prime Minister’s visit has caused pressures on the Emergency Services Unit of $37,000.  A second visit is planned for May.  A continuing trend of such overtime items may result in a budget pressure of $350,000 by year end.     

c)    Paid Duty & Other Revenue

Staff projects a net surplus of between $300,000 and $575,000 in various revenue and recovery accounts, arising largely from paid duty.  Although there has already been an upward adjustment to the revenue budgeted for paid duty, the OPS has historically experienced a surplus in this area largely due to one-time City requests.  This trend is expected to continue in 2012.   The variance in the paid duty surplus is dependent on the level of road construction activity this summer.  Paid duty officers are required for traffic control at intersections.

d)    Alarm Revenue

In 2010, the false alarm fee was increased to $130 to better reflect the cost of attending the call.  A surplus of between $100,000 and $150,000 is being projected for 2012 based on a higher volume of false alarm calls than budgeted.

e)   Vehicle Maintenance

Savings in vehicle maintenance costs has provided a surplus in past years and information for the first three (3) months indicates that this trend will continue in 2012. 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. The budgets were partially adjusted in the 2012 budget, but it is still expected to provide a surplus of between $100,000 and $150,000.

Horizon Issues

Contract Settlement Costs

OPA and SOA contract negotiations for 2011 are still in progress.  The first arbitration hearing is on the OPA contract and is scheduled to be held in July 2012. It is not possible to assess the financial impact at this time.

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.

CONSULTATION

Not applicable.

FINANCIAL IMPLICATIONS

There are no financial implications.

CONCLUSION

The Police Service is identifying several pressures and possible solutions in the first quarter report, based on the information that is known at this time. The analysis shows a result ranging from a break-even position to a surplus of $400,000.  The outcome is highly dependent on the arbitrator’s decision on the 2011 salary award and the impact of the various pressures and solutions.

In July, staff will present the Service’s financial position as at 30 June 2012.  It will provide an update on the above-noted issues and identify new pressures or solutions that have emerged.  The year-end forecast will be adjusted accordingly.

(Original signed by)

Charles Bordeleau

Chief of Police

Attach (2):      

Annex A:  Purchase Orders Issued Under Delegated Authority

Annex B:  Capital Budget Works in Progress