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 OPS 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 OPS expense and revenue patterns become more certain.

DISCUSSION

Staff is currently identifying a small deficit position for 2013 of $200,000. This deficit is primarily due to the 2011/2012 arbitration award for the sworn officer and civilian collective agreements, received on April 5^th, 2013. Measures will be taken to minimize the impact of the award and these actions will be reported in the second quarter. In addition, the year-end position is still dependent on the impact of any changes in the various pressures and solutions identified in the first quarter, as well as the impact of the horizon issues, which are discussed below.

To date, the projected pressures include the contract settlement costs, WSIB and fuel costs. These issues are partially offset by potential solutions which include savings in court overtime costs and paid duty and other revenue accounts. Each of these variances is summarized in Table 1 and discussed in more detail below.

Table 1 - Ottawa Police Service 2013 Projected Year End – Significant Variances
Pressures	($000)
Contract Settlement Costs (Arbitration)	(200)
WSIB Costs	(150)
Fuel Costs	(50)
Total Pressures	(400)
Solutions
Court Overtime Costs	150
Paid Duty and Other Revenue	50
Total Solutions	200
Projected Surplus (Deficit)	(200)

Identified Pressures and Solutions

a) Contract Settlement Costs

Negotiations with the Ottawa Police Association (OPA) on the renewal of the collective agreements covering uniform and civilian personnel for the period of January 1, 2011 through December 31, 2012 have been ongoing. The unresolved matters were sent to arbitration with the hearing and written submissions completed on December 3, 2012. The decision by the arbitrator was presented on Friday April 5^th, 2013 and included an across-the-board increase to base salary of 2.99% for 2011 and a 2.95% for year 2012 along with a few modifications to other aspects of the agreement. Staff has prepared a preliminary costing of the arbitration award, which results in a pressure over what was previously budgeted in the range of $200,000. A more detailed costing will be done for the second quarter report, based on the actual payments made.

b) WSIB Costs

The Board was presented with the Workplace Accidents and Injuries: 2012 Annual Report at its March 2013 meeting. This report identified that costs in this area have increased over the past several years. WSIB direct costs include wages, health care, pension, survivor benefits and administrative fees. A significant portion of costs are associated with permanent WSIB awards which occurred before amalgamation and these costs cannot be affected. But moving forward, the OPS is taking measures to minimize the frequency and severity of new workplace injuries to help reduce costs. Although the 2013 budget was adjusted by $40,000, a deficit of $150,000 may result by the end of 2013. This assumption is based on the year-end actual data for 2012, which shows a shortfall in the range of $300,000.

c) Fuel Costs

The OPS’s 2013 fuel budget was developed using a retail pump price of $1.28/litre. This amount is reduced to an effective price of $1.10/litre, after accounting for tax exemptions and discounts through the fuel card program. The budget of $3.1 million was based upon a consumption level of 2.8 million litres of fuel for 2013.

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 $1.20 and $1.28 per litre respectively.

Table 2
Average Retail Price of Gasoline Per Litre - 2013

Month	Average Retail Price
January	$1.201
February	$1.283
March	Not Yet Available
Source: Statistics Canada (http:// http://www.statcan.gc.ca/pub/62-001-x/2012012/t047-eng.htm- Table 13)

Staff is anticipating a small deficit in the fuel account of $50,000 for 2013 based on minor variances in price and volume projections.

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 2013. The impact of the expanded idle reduction program on fuel consumption will also be monitored and may reduce this pressure.

d) Overtime and Court Overtime Costs

Overtime for the first quarter of the year has been stable and on budget. Overtime costs are projected to break even for 2013 provided a stable operating environment continues for the rest of the year. Court overtime costs, on the other hand, are showing a surplus in the first quarter of the year and are projected to have a surplus of $150,000 by the end of the year.

e) Paid Duty and Other Revenue

Paid Duty and other revenue have provided surpluses in past years, a trend that will likely continue on into 2013. Staff project a net surplus of approximately $50,000 in the various revenue and recovery accounts, arising largely from paid duty. There was an upward adjustment of $153,000 to the revenue budgeted for paid duty in 2013, however, the OPS has historically experienced a significant surplus in this area, largely due to City requests. This trend is expected to continue in 2013 based on road construction activity this summer.

Horizon Issues

There are currently three issues on the horizon that may create pressures going forward in 2013. Legal claims are financed directly by the OPS given the City’s self insurance approach for claims up to $3.0 million. Currently there are over 80 claims outstanding. Depending on the timing and result of these claims, there may be an impact on 2013 operating costs. Another pressure relates to the indemnification costs provided for in the OPA collective agreement. Depending on the results of current legal proceedings, significant pressure may result. The last issue relates to the Collision Reporting Centre revenues for 2013. The launch of the automatic payment plan was delayed by four weeks due to technical issues and this may impact the amount of revenue generated in 2013, compared to budget. Staff will be monitoring these issues and any others that may develop, with an update in the next quarterly report.

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 pressures and possible solutions in the first quarter report, based on the information that is known at this time. The analysis shows a projected deficit of $200,000, mainly arising from the 2011/2012 arbitration award for sworn officers and civilians. Staff will fine-tune the estimates and search out further solutions.

In July, staff will present the Service’s financial position as at 30 June 2013. 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

Responsible for report: Director General Debra Frazer

Attach (2): Annex A: Purchase Orders Issued Under Delegated Authority

Annex B: Capital Budget Works in Progress

FINANCIAL STATUS REPORT - FIRST QUARTER 2013

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

BACKGROUND

Table 1 - Ottawa Police Service

Horizon Issues

CONSULTATION