REPORT RAPPORT

DATE:	22 October 2012
TO/DEST:	Executive Director, Ottawa Police Services Board
FROM/EXP:	Chief of Police, Ottawa Police Service
SUBJECT/OBJET:	FINANCIAL STATUS REPORT - THIRD QUARTER 2012

RECOMMENDATIONS

That the Ottawa Police Services Board approve:

1. A budget transfer in the amount of $464,000 from Capital Project #906260 – “Facility Initiatives 2011” to Project #906772 – “Facility Security Initiatives”.

2. A budget transfer in the amount of $370,000 from Capital Project #905093 – “E‑Ticketing & Collision Reporting” to Project #906213 – “Business Transformation”.

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 updates the previous quarter’s projection which was presented in the second quarter report, at the July 30^th meeting of the Board with any significant variances that are known at this time.  The accuracy of this projection improves with each quarter as the Service’s expense and revenue patterns become more certain.

DISCUSSION

Staff continues to project a breakeven position for the Service after analyzing the identified pressures and solutions that have emerged in the first nine months of the year. One item that is still unknown is the outcome of the collective agreement negotiations. The arbitrator’s decision on the 2011 salary award could have a negative impact on our financial position.

The projected pressures continue to include fuel and overtime costs, along with several other smaller pressures, which were identified in the second quarter report.  The potential solutions include paid duty and various other revenue accounts, as well as savings in court overtime costs.  Each of these significant variances is summarized in Table 1 and discussed in more detail below.

Table 1 - Ottawa Police Service 2012 Projected Year End – Significant Variances
Pressures	($000)
Fuel Costs	(180)
Overtime Costs	(370)
WSIB Costs Academic Commitments	(100) (80)
Total Pressures	(730)
Solutions
Paid Duty & Other Revenue	400
Court Overtime Costs	130
Alarm Revenue	100
Compensation	100
Total Solutions	730
Projected  Surplus  (Deficit)	0

Identified Pressures & Solutions

a) Fuel Costs

The Ottawa Police Service’s 2012 fuel budget was developed using a retail pump price of $1.25/litre.  This amount is reduced 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 period of $1.24 was slightly below our budgeted price of $1.25/litre.

Table 2
Average Retail Price of Gasoline Per Litre - 2012
Month	Average Retail Price
January	$1.218
February	$1.240
March	$1.263
April	$1.306
May	$1.255
June	$1.191
July	$1.207
August	$1.247
Average	$1.241
Source: Statistics Canada (http://www.statcan.gc.ca/pub/62-001-x/2012004/t047-eng.htm-Table 13)

Using costs to date, along with an expected increase in the pump price for the remainder of the year, staff is estimating the fuel account will be in a deficit position of $180,000.  This forecast is based upon current pump prices that have been consistently higher than $1.25 in the month of September. 

As fuel prices continue to fluctuate, staff will be monitoring and analyzing different pricing scenarios. A one cent change in the average pump price will result in a $20,000 variance in the projection.

b)    Overtime & Court Time Costs

Though overtime is expected to be in a deficit position at year-end, third quarter overtime costs are lower than in previous years.  There have been fewer major events in the third quarter and Ottawa has also experienced fewer homicides in 2012, which has also contributed to a reduction in the forecasted pressure in overtime.  The overall estimated pressure from overtime of $370,000 is being partially offset by a surplus in court overtime of $130,000.

c)    WSIB Costs

Costs relating to WSIB (Workplace Safety and Insurance Board) have increased over the past several years.  Although minor adjustments to the budget were made, a budget pressure continues in this area.  A pressure in the amount of $100,000 is projected.

d)    Academic Commitments

As identified in the last quarterly report, as part of the previous Chief’s initiative, officers are encouraged to pursue higher education in order to support succession planning at OPS. These commitments have resulted in an $80,000 pressure.

e)    Paid Duty & Other Revenue

Staff projects a net surplus of $400,000 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 City requests.  This trend has continued in 2012 based on the scope of City capital projects underway for road construction; paid duty officers are required for traffic control at intersections.

f)    Alarm Revenue

A surplus of $100,000 is being projected for 2012 alarm revenue based on the actual volume of false alarm calls compared to the expected volume used in the budget.  Although a decrease in the number of false alarm calls was included in the 2012 budget, the reduction has not been as great as budgeted, resulting in the projected surplus.

g)    Compensation

A surplus of $100,000 is being projected for 2012 in the compensation area based on a forecast of actual costs. This is due to an analysis of the leave liability, which is decreasing.  The bank of unused vacation days is dropping as more members take their full annual leave entitlement. 

HORIZON ISSUES

Contract Settlement Costs

The Ottawa Police Association (OPA) and the Senior Officers’ Association (SOA) contract negotiations for 2011 are still in progress.  An arbitration hearing on the OPA contract is scheduled to be held in October 2012.

Capital Project Budget Transfers

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 funding any deficits.  Annex C indicates the three projects which are being closed.  Any remaining funding is being returned to source.

Staff is requesting that the Ottawa Police Services Board approve a budget transfer in the amount of $464,000 from Capital Project #906260 – “Facility Initiatives 2011” to Project #906772 – “Facility Security Initiatives”.  This budget transfer is being requested to support facility security upgrades at OPS divisional facilities.  Also, a budget transfer is required in the amount of $370,000, from Capital Project #905093 – “E-Ticketing & Collision Reporting” to Project #906213 – “Business Transformation” to consolidate all transformation projects into one.

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 Q3 results summarized by directorate;

§ Annex B, which provides a list of all contracts awarded under delegated authority which exceed $25,000;

§ Annex C, which provides a summary of the OPS capital budget works in progress.

There are no activities to report under Board Policy CR-8 - “The Acceptance of Donations, Gifts, Loans and Sponsorships”.

CONSULTATION

Consultation with external stakeholders is not required for this matter.

FINANCIAL STATEMENT

The financial implications are as outlined in this report.

CONCLUSION

The Police Service is identifying several pressures and potential solutions based on operating results to the end of the third quarter.  The analysis shows a projected break-even financial position at year-end.  This outcome is highly dependent on the arbitrator’s decision on the 2011 salary award.  In March 2013, staff will present the final quarterly report on the Service’s financial position as at 31 December 2012.  It will provide a year-end update on the above-noted issues, and identify the year-ending financial position of the Service.

(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 (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)