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REPORT RAPPORT |
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DATE:
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25 March 2013 |
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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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ANNUAL FINANCIAL REPORT: 2012
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RECOMMENDATIONS
That the Ottawa Police Services Board:
1. Receive this report for information.
- Approve a budget transfer in the amount of $180,000 from Capital Project #906556 – “IT Applications 2012” to Project #906555 – “IT Telecommunications 2012”.
BACKGROUND
The 2012 Annual Financial Report presents the year-end financial position of the Ottawa Police Service (OPS) and outlines the operational issues that have affected the Police Service’s finances in 2012. These results are subject to external audit.
DISCUSSION
The OPS ended the 2012 fiscal year with an operating surplus of $86K. This amount was partially offset by a $54K deficit which has been allocated to the OPS from the City of Ottawa. This allocation is the OPS share of the deficit from the taxation accounts for 2012. As a result, the combined year-end operating and taxation position was a surplus of $32K for 2012.
There are several components making up the 2012 year-end operating position. Ongoing police operations registered a surplus of $1.0 million. The financial / fiscal accounts however registered a deficit of $0.9 million, mainly attributable to a significant one-time pressure – a legal settlement of $1.2 million. Together these results produced an operating surplus of $86K (before taxation accounts) at year-end. Table 1 summarizes these results which are discussed in more detail below.
It should be noted that the outcome of the collective agreement negotiations, which had been included in the Horizon Issues in the past Quarterly reports, was unknown at year-end. Staff has accrued an amount equal to the 2012 budget provision for the salary settlement increase to address the payments and budget base adjustments required once the arbitrator’s ruling has been issued.
Table 1
Ottawa Police Service2012 Year-end – Significant Variances
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Item |
$ Millions |
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1. On-Going Police Operations |
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a. Paid Duty Revenue |
0.5 |
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b. Reduced Spending |
0.4 |
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c. Records Clearance and Other Revenue |
0.3 |
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d. Alarm Revenue |
0.1 |
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e. Police Facility Costs |
0.2 |
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f. Compensation and Retiree Benefits |
(0.2) |
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g. Fuel Costs |
(0.1) |
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h. Overtime and Court Time Costs |
(0.1) |
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i. Academic Commitments |
(0.1) |
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Sub - Total |
1.0
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2. Financial / Fiscal Accounts a. Legal Settlement b. WSIB Costs c. Insurance Claims d. Debt Costs Sub – Total
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(1.2) (0.3) 0.4 0.2 (0.9)
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2012 Operating Surplus / (Deficit) |
$0.1 |
On-Going Police Operations
a) Paid Duty Revenue
There was a net surplus of $530K 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 has continued in 2012 based on the scope of capital projects underway. The variance in the paid duty surplus is attributable to the level of road construction activity this summer. Paid duty officers are required for traffic control at intersections.
b) Reduced Spending
During the 3rd quarter directorate meetings with Superintendants and Directors, staff was informed of a potential legal settlement on the horizon which might create a $1.2 million pressure. Staff was directed to limit spending to essential items and to assist in finding some savings to offset this unexpected cost, to avoid a deficit. The reduced spending provided $420K in savings to help fund the legal settlement.
c) Records Clearance and Other Revenue
A surplus of $318K was achieved in various revenue and recovery accounts, with an increase in records clearance revenue being $157K, sale of accident reports $77K, and $84K for recoveries as a result of evidence disposal. The 2013 budget for several of these items have been adjusted accordingly.
d) Alarm Revenue
Alarm revenue provided a small surplus of $104K for 2012. Although, the 2012 budget was built around a projected decrease in the number false alarm calls for 2012, the actual reduction has not been as great as budgeted, resulting in a surplus at year end.
e) Police Facilities Maintenance
The facilities maintenance costs charged back from the City of Ottawa ended the fiscal year with a surplus of $167K. In an effort to reduce spending, and help make room for the legal settlement discussed below, the OPS directed City Facility Staff to limit expenditures only to mission critical items in Q4 2012.
f) Compensation- Retiree Benefits
A net deficit of $202K for the compensation accounts was mainly as a result of increased costs in retiree benefits. These costs have been increasing over the past several years. The increase is partially due to increased usage but also due to the rising costs of medical plans. The budget in 2013 was increased by $50K as part of a strategy to bring the budget in line with the actual costs over the next few years.
g) Fuel Costs
The Ottawa Police Service’s 2012 fuel budget was developed using a retail pump price of $1.25/litre. (This amount translates 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. The average for the year of $1.238 was slightly below the budgeted price of $1.25.
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Table 2 |
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Average Retail Price of Gasoline Per Litre – 2012 |
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Month |
Average Retail Price |
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January |
$1.218 |
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February |
$1.240 |
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March |
$1.263 |
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April |
$1.306 |
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May |
$1.255 |
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June |
$1.191 |
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July |
$1.207 |
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August |
$1.247 |
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September |
$1.271 |
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October |
$1.248 |
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November |
$1.220 |
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December |
$1.185 |
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Average |
$1.238 |
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Source: Statistics Canada (http://www.statcan.gc.ca/pub/CPI-Table 13) |
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Even with the slightly lower average fuel price, the fuel account ended the year in a deficit of $131,800. This deficit is mainly attributable to a volume variance whereby 2.78% more fuel was consumed than was planned for. Spikes occurred in consumption early in the year before the impact of the roll out of the anti-idling technology to the Paid Duty fleet occurred. The year end deficit for this item was smaller than what had been forecasted in the quarterly reports.
h) Overtime & Court Time Costs
The combined Overtime and Court Time cost accounts resulted in a deficit at year-end of $90k. At year end, the overtime accounts had registered a deficit of $240K. This amount is less than the $370K deficit projected in the third quarter report. The difference was due to the below average number of homicides and demonstrations in the last quarter of the year. Court overtime ended the year in a surplus position of $150k.
i) Academic Commitments
The OPS supports members in their pursuit of continued learning, both experiential and academic, in keeping with the Board’s direction to ensure a strong executive succession management plan.
In 2012, the former Chief approved a plan to enable 21 officers to begin their studies towards an undergraduate degree at Charles Sturt University along with 2 other officers who were approved to complete a Graduate program at Royal Roads. These commitments have resulted in a $100,000 pressure in 2012. These expenditures were addressed in the 2013 Budget.
Financial / Fiscal Accounts
a) Legal Settlement
A legal settlement of $1.2 million was made in December of 2012 to finalize an on-going legal claim. This matter involved a claim for damages following a 2007 motor vehicle accident in which a pedestrian was struck by an OPS cruiser.
Although the OPS is aware of the legal settlements that are in progress, it is difficult to predict the timing of these claims and what the resulting settlement will be. Steps will be taken to increase this provision in future years.
b) WSIB Costs
Compensation costs include costs relating to WSIB (Workplace Safety and Insurance Board). The costs in this area have increased over the past several years and, although minor adjustments to the budget were made, a deficit of $350K resulted by the end of 2012. Additional funds were allocated to this budget in 2013, and OPS will continue to work to understand the pressures on this account and build the budget base accordingly.
c) Insurance Claims
Savings in insurance claims lines resulted in a $400K surplus.
d) Debt Costs
As a result of lower interest rates as well as the amount of debt that was issued for completed projects a savings of $170K was achieved in this area.
Capital Project Budget Adjustments
Staff is requesting that the Board approve a budget transfer in the amount of $180,000, from Capital Project #906556 – “IT Applications 2012” to Project #906555 – “IT Telecommunications 2012”. This budget transfer is being requested for the purpose of consolidating the information technology infrastructure projects.
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 Fourth 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.
§ Annex D on Board Policy CR-8 - “The Acceptance of Donations, Gifts, Loans and Sponsorships”; Section 6 and 7 of the policy require that the Chief report to the Board all donations, gifts, loans and sponsorships valued at over $500 as part of the quarterly process and that all that are valued over $50 be properly documented. This annex lists those items for the 2012 year. The annex details the sponsorships for the Ottawa Police Gala along with those items donated, either through direct monetary donation or for silent auction items.
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 purposes only therefore, there are no financial implications.
CONCLUSION
The Ottawa Police Service generated a surplus on operations for 2012 of $86K. It was primarily due to increased revenue and recoveries along with a reduction in some expenditures, which more than offset the pressures for legal settlements, WSIB, fuel, overtime and benefit costs. Including the deficit of $54K on the taxation accounts, the net surplus for the OPS for 2012 was $32K. At its meeting on 27 March 2013, City Council will be asked to approve the Finance and Economic Development Committee recommendation that the City’s 2012 tax supported operating surplus (including the OPS portion) be applied towards various City projects and reserve funds.
(Original Signed By)
Charles Bordeleau
Chief of Police
Responsible for report: Director General Debra Frazer
Attach (4): Annex A: 4th 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)
Annex D: Acceptance of Donations, Gifts, Loans and Sponsorships