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1. AUDIT
REPORT - FINANCIAL STATEMENTS FOR IN-HOUSE SOLID WASTE COLLECTION - 2008 RAPPORT
DE VÉRIFICATION - ÉTATS FINANCIERS POUR LA COLLECTE DES DÉCHETS SOLIDES PAR
LA VILLE - 2008 |
Committee recommendation
That Council receive this
report for information.
Recommandation DU Comité
Que le Conseil
prenne connaissance de ce rapport.
Documentation
1.
Deputy
City Manager's report, Infrastructure Services and Community Sustainability,
dated 13 February 2009 (ACS2009-ICS-SWS-0001).
Planning and Environment Committee/
Comité de l'urbanisme et de l'environnement
and Council / et au Conseil
13 February 2009 / le 13 février
2009
Submitted
by/Soumis par: Nancy Schepers,
Deputy City Manager/Directrice
municipale adjointe,
Infrastructure Services and
Community Sustainability/
Services d’infrastructure et
Viabilité des collectivités
Contact Person/Personne ressource : Albert Shamess, Director / Directeur,
Solid
Waste Services/Services de gestion des déchets solides
(613)
580-2424 x25873, Albert.Shamess@ottawa.ca
SUBJECT:
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AUDIT REPORT - FINANCIAL STATEMENTS
FOR IN-HOUSE SOLID WASTE COLLECTION - 2008 |
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OBJET :
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RAPPORT DE VÉRIFICATION - ÉTATS FINANCIERS POUR LA COLLECTE DES
DÉCHETS SOLIDES PAR LA VILLE - 2008 |
That the Planning and Environment Committee recommend Council receive this report for information.
Que le Comité de l’urbanisme et de
l’environnement recommande au Conseil de prendre connaissance de ce
rapport.
On
November 30, 2005, City of Ottawa Council approved and awarded one zone of the
six-year collection contract to City Staff (Zone C3) (hereafter referred to as
“In-house”).
In approving the use of In-house Collection for Zone C3, City of Ottawa Council also approved:
“That Council require an annual audit of
expenditures for works awarded to the City, that Council require an annual
information report, qualitative and quantitative in nature, relevant to this
program, as suggested by the City Internal Auditor, and that such reports
follow the usual Committee process.”
This report presents both the audited financial statement for the twelve (12) months, which ended May 31, 2008, and the Department’s performance report. Both the financial statement and performance report are the responsibility of management. The Auditor’s responsibilities are discussed in each section.
As in prior years, the methodology used by management to prepare the financial statements is consistent with the Managed Competition Protocol and with the former Regional Internal Auditor’s Report on incremental costs approved by Regional Council on May 27, 1998 and September 8, 1998, respectively. There are four fundamental concepts used in preparation of the In-house Collection statements:
§ a “going concern” operation;
§ this is a unit-based contract;
§ expenditures and revenues are recorded on an accrual basis; and
§ includes all incremental costs.
The Statement of Operations of the In-house Waste Collection for the twelve (12) months ended May 31, 2008 was audited by Ernst & Young LLP, the City’s external auditor. Their audit was designed in accordance with Generally Accepted Auditing Standards to provide reasonable, rather than absolute, assurance that the statements are free from material misstatement. An unqualified opinion was issued on the statements. The Statement of Operations and the Auditor’s Report are submitted in Document 1.
The In-house Waste Collection for Zone C3 resulted in an operating surplus for Year 2, the twelve (12) months ended May 31, 2008 of $498,847. This is due mainly to efficient routing of collection, managing labour costs and the purchase of new vehicles for the new contract, which has resulted in reduced vehicle maintenance costs.
Performance
Report
In addition to the audited Statement of Operations for In-house Solid Waste Collection, management prepares an annual report on the performance of this contract for Committee and Council. The performance report includes both quantitative and qualitative assessments identified for the program. Ernst & Young LLP has reviewed the performance information to ensure it was prepared on a consistent basis with prior years and accurately reflects the result of operations for Year 2.
In-house Financial
Performance
The table below presents the contractual and overall savings to area residents for the second year of operations under the new contract. The contract is structured to be paid at the bid unit rate for the actual tonnage. The table also shows the total savings for year one and two as well as the 7 years of the old contracts that ended in 2006 as previously reported.
Table 1
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New Contract |
New Contract |
Old Contract |
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Year 2 |
Year 1 |
Years 1-7 |
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2007-2008 |
2006-2007 |
1999-2006 |
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Savings
from City Bid |
$ 977,689 |
$
1,101,647 |
$ 1,425,431 |
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Additional
Savings from In-house Collection Operations |
$ 498,847 |
$
254,365 |
$
49,210 |
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Total Savings |
$ 1,476,536 |
$ 1,356,012 |
$ 1,474,641 |
Total savings are a combination of the
following: (1) savings as a result of the City’s bid price compared to the next
closest bid, and (2) savings as a result of actual costs of the operation
compared to the City’s bid price allocation (bid costs minus actual cost = operating
savings). The overall actual cost per
tonnes in 2008 was $77.88 as shown in the Schedule to the Statement of
Operations. This represents a 3.3%
decrease over the 2007 cost per tonne of $80.55. The In-house group continues to find efficiencies by streamlining
labour, fleet and collection routes.
Across the City, actual tonnages were 0.52%
below estimated quantities, with some variation between the five zones and the
different waste streams. For the year,
Zone C3 total tonnes for garbage and leaf and yard waste was less than the
tendered estimated quantities by 18.93%, and recyclable materials were lower
than estimated in the tender by 18.96%.
The savings as a result of the City’s bid price (price per tonne) reflect aggressive pricing for garbage and recycling collection. These savings can be attributed to route optimization, managing labour costs and the benefits of a new fleet. Overall, the financial performance for the second year of the operation reflects continued operational efficiencies, and the productivity of dedicated and experienced staff. At the same time the lower than expected volumes had a favorable impact on the 2nd year savings.
Qualitative
Assessment
In addition to the quantitative evaluation provided by the financial statements, a qualitative analysis has been conducted based on the information available in the Request for Services (RFS) software application. The general procedure for handling and logging waste collection telephone inquiries can be described as follows: calls that come into the City’s Call Centre are handled either directly by the operator and not recorded, or calls that require follow-up action by Solid Waste staff (Customer Clerk and/or Inspector) or action by the appropriate contractor, are logged. The following table summarizes calls logged into the system that were deemed to be justifiable calls.
Table 2
June 1, 2007 to May 31, 2008
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Call Type |
In-house Services Zone C3 |
% of City Total |
Private Sector (Zones C1, 2, 4 & 5) |
% of City Total |
City total |
|
Households |
46,042 |
18.0 |
209,707 |
82.0 |
255,749 |
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Black Box collection |
738 |
31.9 |
1,573 |
68.1 |
2,311 |
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Blue Box collection |
468 |
28.5 |
1,174 |
71.5 |
1,642 |
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Garbage collection |
1,835 |
32.5 |
3,807 |
67.5 |
5,642 |
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Leaf & Yard collection |
695 |
25.5 |
2,030 |
74.5 |
2,725 |
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Total Calls/year |
3,736 |
30.3 |
8,584 |
69.7 |
12,320 |
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Calls/1,000 homes |
82.56 |
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41.65 |
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49.02 |
Both the In-house and private sector zones experienced decreases in calls over the year 1 figures (June 1, 2006 to May 31, 2007). This is due to the homeowners becoming familiar with all the changes that resulted from the implementation of the new contracts on June 5th, 2006 as well as the implementation of the LCBO bottle return system, which began in February 2007.
In year 2, calls per 1,000 homes were 82.56 for the In-house zone and 41.65 for private sector zones. The main issues justifying the difference in call type data are:
1. The In-house numbers related to recycling collection (Blue and Black Box) are higher because City staff tend to be more involved with leaving some or all material behind if it is prohibited (i.e. styrofoam or film plastic).
This report has been prepared in
collaboration with the Solid Waste Services Branch, Infrastructure Services and
Community Sustainability Department.
The financial statements and performance report are the responsibility
of management.
There are no legal/risk management impediments arising from this report.
There are no financial implications from this report.
Document 1 In-House Waste Collection Statement of Operations and Auditor’s Report – May 31, 2008 (Held on file with the City Clerk)
Staff from the Corporate Services, City Clerk’s Office will submit this report to Council for information