REPORT RAPPORT

DATE:	28 April 2014
TO/DEST:	Executive Director, Ottawa Police Services Board
FROM/EXP:	Chief of Police, Ottawa Police Service
SUBJECT/OBJET:	FINANCIAL STATUS REPORT - FIRST QUARTER 2014

RECOMMENDATION

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

BACKGROUND

The quarterly financial report summarizes the current financial position of the Ottawa Police Service (OPS), outlines the operational issues affecting the OPS’ finances and presents the projected year-end financial position for the organization.  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 OPS’ expense and revenue patterns become more certain.

DISCUSSION

Based on current information staff is identifying a balanced position by year-end for 2014.

The information to date includes projected surpluses in paid duty and other revenue, along with fleet maintenance and court time. Pressures from a projected shortfall in the revenue from the Collision Reporting Centers (CRC), WSIB, overtime and fuel costs are also being identified.  Each of these significant variances is summarized in Table 1 and discussed in more detail below.

As always, the year-end position is still dependent on any changes in the various pressures and solutions that have been identified in the first quarter of the year, as well as the impact of the horizon issues that are discussed below.

Table 1 - Ottawa Police Service 2014 Projected Year End – Significant Variances
Pressures	($000)
Revenue  CRC	(250)
WSIB Costs	(150)
Overtime & On Call	(200)
Fuel Costs	(50)
Total Pressures	(650)
Solutions
Paid Duty & Other Revenue	500
Vehicle Maintenance	100
Court Time Costs	50
Total Solutions	650
Projected  Surplus  (Deficit)	0

Identified Pressures & Solutions

a) Revenue – Collision Reporting Centers
    (CRC)

A concern about the CRC revenues was discussed in the 2013 Annual Financial Report.  The budget was increased to $1.6 million in 2014 from a budget of $800,000 in 2013 based on an expected increase in the revenue as we expand the program. Although the revenue has grown and continues to grow, currently a shortfall is being projected for 2014. The main factor preventing the achievement of the OPS revenue goal is slower enrolment by insurance companies in the automatic payment program. This has impacted the revenue in the first part of the year, and a shortfall in the amount of $250,000 is being projected for 2014.

b)   WSIB Costs

As reported to the Board in March in the 2013 Workplace Accidents & Injuries Annual Report, the costs in this area have increased significantly 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, OPS is taking measures to minimize the frequency and severity of new workplace injuries to help reduce costs. 

The budget was increased by $290,000 in 2014 which was based on the projected shortfall at the time of the budget preparation. However based on the 2013 year-end shortfall of $400,000 and the trends to date we are projecting a 2014 shortfall of $150,000.

c)   Overtime, Court Overtime Costs and On-Call

Overtime and on-call costs are trending towards a deficit position, while court overtime is expected to end the year with a small surplus.

· There was only one homicide and no major events in the first quarter of the year and therefore, overtime has been relatively stable and close to budget.  The overtime costs are currently projecting a $70,000 pressure for 2014.

· On-Call payments are expected to result in a year-end pressure of a $130,000 pressure.  This item is now being tracked separately so that OPS becomes more rigorous in its approach to managing on-call work.

· A small surplus of $50,000 is project for court overtime costs.

d) Fuel Costs

The Ottawa Police Service’s 2014 fuel budget was developed using a retail pump price of $1.28/litre.  This amount was reduced to an effective price of $1.097/litre, after accounting for tax exemptions and discounts through the fuel card program.  This effective price also took into account $100,000 of reductions in the overall fuel budget related to the anticipated benefit of the more fuel efficient Ford Taurus model over the Ford Crown Victoria.  This year is the first year that the Service will benefit from 12 months of operation of the Taurus. The budget of $3.0 million was based upon a consumption level of 2.7 million litres of fuel for 2014.

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 $1.25 and $1.29 per litre respectively.

Table 2 Average Retail Price of Gasoline Per Litre – 2014
Budget	$1.28
Month	Average Retail Price
January	$1.252
February	$1.287
March	Not Yet Available
Source: Statistics Canada (http:// http://www.statcan.gc.ca/pub/62-001-x/2014002/t047-eng.htm- Table 13)

Staff is anticipating a small deficit in the fuel account of $50,000 for 2014 based mainly on an unfavourable variance in price.  We 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 2014.  

e)   Paid Duty & Other Revenue

Staff projects a net surplus of approximately $500,000 in the various revenue and recovery accounts, arising largely from paid duty. The OPS has historically experienced a surplus in the paid duty revenue, largely due to City requests related to construction.

f)   Vehicle Maintenance

Vehicle maintenance activities have provided surpluses in past years and are projected to continue in 2014 providing a $100,000 surplus. 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.

Horizon Issues

There are currently several issues on the horizon that may create pressures going forward in 2014. Mainly, they are the collective agreement negotiations/arbitration and potential legal claims and indemnification.

Collective Agreement Arbitration – Submissions have been made to the arbitrator regarding the 2013 sworn and civilian collective agreements.  Staff has accrued 2013 budget funds to address the retroactive salary payments resulting from the arbitration.  The impact of the arbitration settlement will be addressed in the relevant quarterly report.

Legal Claims - OPS is self insured for claims up to $3.0 million.  Currently there are over 90 claims outstanding. The result, magnitude and timing of these claims may have an impact on 2014 operating costs.  As well, significant indemnification costs could also result in year-end financial pressure.

Staff will be monitoring these issues and any others that may develop, with an update in the next quarterly report.

Quarterly 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, provides a list of all contracts awarded under delegated authority by the Chief that exceed $25,000 and summarizes the transactions from January to March.  In total, $2.157 million in purchase orders were issued in the First Quarter.  The breakdown of these purchase orders by category is shown in Table 3.  Professional services contracts, fleet and equipment purchases, and contracts for information technology hardware, applications and maintenance account for 67% of the value of all purchase orders issued in Q1. Expenditure definitions are included in Annex A for reference.

:
Table 3 Summary by Type Contracts Under Delegated Authority
Type	Amount	Percentage
Professional Services	510,809	24
Consulting Services	275,920	13
Goods & Supplies	357,131	17
Fleet & Equipment	471,758	22
Facilities & Construction	86,426	3
Information & Technology	455,419	21
Total	$2,157,462	100%

§ Annex B provides a summary of the OPS capital budget works in progress and indicates those which will be closed, in accordance with  Section 3.1.3.4 of the Financial Accountability Procedures Manual.  It enables the Director General to close capital projects by returning any remaining balance to the originating sources and fund any deficits.

§ The annual Asset Management Report as required by Policy CR-4 of the Ottawa Police Services Board Policy Manual is presented on a yearly basis in the 2nd Quarter report.

CONSULTATION

Not applicable.

FINANCIAL STATEMENT

There are no financial implications.

CONCLUSION

The OPS is forecasting that it will achieve a 2014 break-even financial position based on operating results to the end of the first quarter.

In July, staff will present the Service’s financial position as at 30 June 2014.  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 Chief)

Charles Bordeleau

Chief of Police

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

Annex B:  Capital Budget Works in Progress

Responsible for Report: Director Genera. D. Frazer