REPORT RAPPORT

DATE:	30 July 2012
TO/DEST:	Executive Director, Ottawa Police Services Board
FROM/EXP:	Chief of Police, Ottawa Police Service
SUBJECT/OBJET:	FINANCIAL STATUS REPORT - SECOND 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 the Ottawa Police Service (OPS).  This report updates the initial projection, which was presented in the first quarter report at the April 30^th meeting of the Board, with any 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 updates the initial projection of the Service’s year-end financial position and outlines below the significant variances that are known at this time.  Staff is still projecting a breakeven position after analyzing the identified pressures and solutions that have emerged in the first six months of the year. One item that is still unknown at this time is the outcome of the Collective Agreement negotiations and the arbitrator’s decision on the 2011 salary award, which may have a positive or negative impact. This is discussed in the Horizon Issues below.

The projected pressures continue to include fuel and overtime costs, although the magnitude has decreased slightly since the first quarter projection.  The potential solutions include paid duty and various other revenue accounts, as well as savings in court time 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	($000)
Fuel Costs	(60)
Overtime & Court Time Costs Academic Commitments	(350) (80)
Total Pressures	(490)
Solutions
Paid Duty & Other Revenue	350
Alarm Revenue	140
Total Solutions	490
Projected  Surplus  (Deficit)	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-serve filling stations is outlined in Table 2.   The average for the period was slightly above our budgeted price due to the fact that for the period March to May, the price was above $1.25/litre.

Table 2
Average Retail Price of Gasoline Per Litre - 2012
Month	Average Retail Price
January	$1.218
February	$1.240
March	$1.263
April	$1.306
May	$1.255
Average	$1.256
Source: Statistics Canada (http://www.statcan.gc.ca/pub/62-001-x/2012004/t047-eng.htm-Table 13)

Using the current average pump price from the above chart to project to the end of the year, the fuel account would be in a small deficit of $60K.  However, there is always speculation that fuel prices will climb due to supply chain uncertainty stemming from the political instability in the Middle East and Northern Africa.  As well, the summer months are approaching, bringing with them the yearly hurricane season. Severe weather could result in a reduction in refinery capacity in the United States, putting further pressure on the price.  However, because uncertainty does exist regarding these events and their impact on the price of fuel, staff is basing the forecast on current pricing levels.

As fuel prices continue to fluctuate, staff will be monitoring and analyzing the different pricing scenarios.  Based on the analysis, staff has determined a one cent change in the average pump price will result in an approximate $20K variance in the projection.

As staff continue to watch the trend in gasoline prices very closely over the balance of the year, they will 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 and may provide some relief if the fuel prices increase.

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 and Occupy Ottawa demonstrations in 2012.  Additionally, the Israeli and other ministerial visits have caused pressures on the Emergency Services Unit’s overtime budget.  A continuing trend of such overtime items—along with forecasting a level of activity similar to 2011for the last six (6) months of this year—will result in a budget pressure at year end.  This forecasted pressure is being partially offset by a forecasted surplus in court overtime, leaving a net pressure of $350K.

c)    Academic Commitments

Officers are encouraged to pursue higher education in order to support succession planning at OPS. In early 2012, a plan was approved to enable 21 officers to begin their studies towards an undergraduate degree at Charles Sturt University along with two (2) other officers who were approved to complete a Graduate program at Royal Roads. These commitments have resulted in an $80K pressure.

d)    Paid Duty & Other Revenue

Staff projects a net surplus of $350K in various revenue and recovery accounts, arising largely from paid duties.  Although there has already been an upward adjustment to the revenue budgeted for paid duties, 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 based on the scope of capital projects underway.  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.

e)    Alarm Revenue

A surplus of $140K is being projected for 2012 alarm revenue based on the actual volume of false alarm calls compared to the expected volume used in the budget. Although a decrease in the number of false alarm calls was included in the 2012 budget, the reduction has not been as great as budgeted, resulting in the projected surplus. 

Horizon Issues

Contract Settlement Costs

The Ottawa Police Association (OPA) and Senior Officers Association (SOA) contract negotiations for 2011 are still in progress.  An unsuccessful mediation on the OPA contract was 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 the Third Quarter Financial Report – Summary By Directorate;

§ Annex B, which provides a list of all contracts awarded by the Chief that exceed $25K;

§ 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.

§ Nothing to report on Board Policy CR-8 - “The Acceptance of Donations, Gifts, Loans and Sponsorships”.

CONSULTATION

Consultation beyond OPS staff is not deemed necessary since this report is for information only.

FINANCIAL STATEMENT

This report has been prepared for information only; therefore, there are no financial implications.

CONCLUSION

The OPS is identifying several pressures and potential solutions based on operating results to the end of the second quarter. The analysis shows a projected break-even.  The outcome is highly dependent on the arbitrator’s decision on the 2011 salary award and the magnitude of impact of the various pressures and solutions.

In October, staff will present to the Board the next quarterly report on the Service’s financial position as at 30 September 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 (3):    Annex A:   2nd Quarter Financial Report – Summary By-Directorate;

Annex B:   Purchase Orders Issued Under Delegated Authority

Annex C:   Capital Budget Works in Progress (Annex C also indicates which projects are being closed and the money returned to source, or any deficits funded from same as per the Financial Accountability Procedures Manual Section 3.1.3.4)