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REPORT RAPPORT |
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DATE:
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24 November 2014 |
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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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FINANCIAL STATUS REPORT - THIRD 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. 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 are identifying a balanced position by year-end for 2014.
There have been some changes in the pressures and solutions identified in the second quarter report, but the projection for a break even position is maintained. The information to date includes projected surpluses in revenue and paid duty, along with a surplus from fleet maintenance, court time, facility costs and some savings arising from efficiencies and reduced expenditures. Pressures from a projected shortfall in the revenue from the Collision Reporting Centers (CRC), WSIB claims, insurance claims/settlements, legal costs, overtime and on-call overtime are also being identified. Each of these significant variances are 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 three quarters of the year, as well as the impact of the horizon issues that are discussed below.
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Table 1 - Ottawa Police Service 2014 Projected Year End – Significant Variances |
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Pressures |
($000) |
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CRC Revenue |
(700) |
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WSIB Claims |
(250) |
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On Call Costs |
(180) |
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Legal Fees Insurance Claims Overtime Costs |
(150) (150) (130) |
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Total Pressures |
(1,560) |
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Solutions |
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Paid Duty & Other Revenue |
700 |
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Efficiencies & Reduced Expenditures |
410 |
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Vehicle Maintenance Court Time Costs Facilities – Operating Costs |
200 150 100 |
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Total Solutions |
1,560 |
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Projected Surplus (Deficit) |
0 |
Identified Pressures & Solutions
a) Revenue – Collision Reporting Centers (CRC)
The revenue estimate for this program was increased in 2014 to $1.6 million from a budget of $800,000 in 2013 based on full implementation of all aspects of the program.
Although the revenue has grown and continues to grow, currently a shortfall of $700,000 is being projected for 2014 while technical and process details are finalized.
b) WSIB Claims
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 arising from work place injury claims include wages, health care, pension, survivor benefits and a significant administrative fee of 36.4%. 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 for claims was increased by $290,000 in 2014 which was based on the projected shortfall at the time of the budget preparation. However the 2013 year-end shortfall proved to be higher, in the range of $400,000 and based on actual costs to date we are projecting a 2014 shortfall of $250,000.
c) Overtime, Court Overtime Costs and On-Call
Overtime and on-call costs will end the year in a deficit position, while court overtime is currently expected to end the year with a surplus.
· On-Call payments are expected to result in a year-end pressure of $180,000. Staff will be analyzing this issue and developing a go-forward strategy.
· As of the end of September, a deficit of $130,000 is being projected in Overtime. This deficit arose mainly from the People’s Social Forum demonstration that occurred in the third quarter.
· A surplus of $150,000 is projected for court overtime costs.
d) Legal Fees, Insurance Claims & Settlements
The OPS is self insured for claims up to $3.0 million. Currently there are over 90 claims outstanding. As settlements occur they are approved as required, reported to the Board and paid. Although we do have a budget for legal costs and claims, the magnitude and timing of these claims may vary significantly from year to year and may have a net impact on operating costs. This year it is being projected that legal costs will end the year with a pressure in the range of $150,000. The insurance claims account is also projected to create a deficit of $150,000.
e) Paid Duty & Other Revenue
Staff projects a net surplus of approximately $700,000 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) Efficiencies & Reduced Expenditures
We are seeing some efficiencies and some reduced expenditures providing projected savings for 2014 in the areas of telecommunications and print management. These along with other reduced expenditures are providing a projected surplus of $410,000. Some of these items will also be providing efficiencies in 2015 to help meet our efficiency targets.
g) Vehicle Maintenance
Vehicle maintenance activities have provided surpluses in past years and are projected to continue in 2014 providing a $200,000 surplus based on the September Fleet billing report actuals. 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.
h) Facility Operating Costs
In past years facility operating costs have provided surpluses. This year we are projecting a net surplus of $100,000 in the various facility operating costs including the costs charged to the OPS by the City.
Horizon Issues
As reported in the Second Quarter Report, there were several issues on the horizon that may still create a pressure in 2014. One was legal costs and the costs of claims which are now reflected as a pressure above. Another horizon issue is the collective agreement negotiations/arbitration which will be discussed below. Overtime costs related to the War Memorial/Parliament Hill shooting are also an issue that will surface in the next quarter.
Collective Agreement Arbitration – In April, submissions were made to the arbitrator regarding the 2013/2014 sworn and civilian collective agreements. The reply submissions were presented on June 27th, after which the arbitrator was to consider all the issues and release his award. Staff has accrued 2013 funds to address the retroactive salary payments resulting from the arbitration. The 2013 and 2014 budget bases have also included an estimate for the salary settlement. The impact of the arbitration settlement will be addressed in the next quarterly report.
Overtime Costs – The War Memorial/Parliament Hill shooting in October will create a significant pressure on the overtime budget, but the amount is unknown at this time.
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, which provides the 3rd Quarter Financial Report – Summary by Directorate.
§ Annex B, provides a list of all contracts awarded under delegated authority to the Chief that exceed $25,000 and summarizes the transactions from June 18, 2014 to September 30, 2014. In total, $1.762 million in purchase orders, not previously approved by the Board, were issued in the Third Quarter. The breakdown of these purchase orders by category is shown in Table 3. Contacts for facilities and construction represent 35% of the total, followed by professional services contracts (23%) and information and technology contracts (20%). Expenditure definitions are included in Annex B for reference.
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Table 3 Summary by Type Contracts Under Delegated Authority
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Type |
Amount |
Percentage |
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Professional Services |
402,552 |
23 |
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Consulting Services |
159,833 |
9 |
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Goods & Supplies |
87,240 |
5 |
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Fleet & Equipment |
135,029 |
8 |
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Facilities & Construction |
613,681 |
35 |
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Information & Technology |
364,081 |
20 |
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Total |
$1,762,415 |
100% |
§ Annex C 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.
CONSULTATION
Not applicable.
FINANCIAL STATEMENT
There are no financial implications.
CONCLUSION
The OPS is identifying several pressures and possible solutions in the third quarter report, based on the information that is known at this time. The analysis shows a projected breakeven position by year end.
In March 2015, staff will present to the Board the final quarterly report on the Service’s financial position of the 31 December 2014. It will provide a year-end update on the above-noted issues.
(Original signed by)
Charles Bordeleau
Chief of Police
Attach (3): Annex A: 3rd Quarter Financial Report – Summary by Directorate
Annex B: Purchase Orders Issued Under Delegated Authority
Annex C: Capital Budget Works in Progress