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REPORT RAPPORT |
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DATE:
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22 July 2013 |
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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 - SECOND QUARTER 2013, INCLUDING ASSET MANAGEMENT REPORT 2012
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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 a 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.
Starting in 2013, the annual report required under Board Policy CR-4: Asset Management, will be included with the second quarter report for each year. Accordingly the 2012 Asset Management report is submitted as part of this report.
DISCUSSION
This report presents a projection of the OPS’ year-end financial position and outlines the significant variances that are known at this time providing both pressures and solutions. With current information staff is identifying a breakeven position for 2013.
It was projected in the first quarter report that there would be a slight deficit, related to the arbitration award received on April 5th, 2013, along with other pressures identified in WSIB and fuel costs. These continue to be the main pressures for the second quarter report. However these pressures are now offset by potential solutions which include savings in court time costs and paid duty and various other revenue accounts. Each of these significant variances is summarized in Table 1 and discussed in more detail.
As always, the year-end position is still dependent on the impact of any changes in the various pressures and solutions that have been identified in the first half of the year, as well as the impact of the horizon issues that are discussed below.
Table 1 - Ottawa Police Service2013 Projected Year End – Significant Variances |
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Pressures |
($000) |
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2012 Contract Costs |
(200) |
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WSIB Costs |
(150) |
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Fuel Costs |
(50) |
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Total Pressures |
(400) |
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Solutions |
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Fleet Maintenance |
150 |
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Court Overtime Costs |
100 |
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Paid Duty & Other Revenue |
100 |
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Alarm Revenue |
50 |
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Total Solutions |
400 |
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Projected Surplus (Deficit) |
0 |
Identified Pressures & Solutions
a) Contract Settlement Costs
As reported in the first quarter report, on April 5th, 2013 the arbitrator awarded an across-the-board increase to the base salary of 2.99% for 2011 and 2.95% for 2012 along with other modifications of the agreement. The award has created a 2013 pressure in the range of $200K.
b) WSIB Costs
The Ottawa Police Services Board (The
Board) was presented with the Workplace Accidents & Injuries: 2012 Annual
Report at its March 2013 meeting and 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, OPS is taking measures through our Health Lifestyles and Safety
section to minimize the frequency and severity of new workplace injuries to
help reduce costs. Even with these new measures and some minor adjustments to
the budget base, a deficit of $150K may result by the end of 2013, less than
the 2012 shortfall of $300k.
c) Fuel Costs
The OPS’ 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 is 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. The average price for the period January to May was $1.247, slightly lower than what was budgeted.
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Table 2 |
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Average Retail Price of Gasoline Per Litre - 2013 |
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Month |
Average Retail Price |
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January |
$1.201 |
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February |
$1.283 |
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March |
$1.271 |
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April |
$1.233 |
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May |
Not Yet Available |
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Average |
$1.247 |
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Source: Statistics Canada (http:// http://www.statcan.gc.ca/pub/62-001-x/2013004-eng.htm- Table 13) |
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Staff is anticipating a small deficit in the fuel account of $50K for 2013 based on minor variances in price and volume projections.
Staff will be monitoring the trend in gasoline prices very closely over the balance of the year. Prices are expected to be on an upward trend right now, with the increased demand for fuel. In addition, speculation exists that this year will be a bad year for hurricanes which could affect supply and refinery capacity. The impact of the expanded idle reduction program on fuel consumption will also be monitored and may reduce the anticipated pressure.
d) Vehicle Maintenance
Vehicle maintenance has provided surpluses in past years and information for the first five (5) months indicates that this area of the budget will also provide a surplus in 2013. 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.
e) Overtime & Court Overtime Costs
Overtime for the first four months of the year has been relatively stable and on budget. A break even position is expected for 2013 provided the operational stability continues for the rest of the year. Court overtime costs are projected to register a surplus of $100K by the end of the year.
f) Paid Duty & Other Revenue
Paid Duty and other revenue have provided surpluses in past years, and will likely continue on into 2013. Staff projects a net surplus of approximately $100K in the various revenue and recovery accounts, arising largely from paid duty. There has already been an upward adjustment of $153K to the revenue budgeted for paid duty in 2013, however, the OPS has historically experienced a surplus in this area in excess of this, largely due to one-time City requests. This trend is expected to continue in 2013. Since paid duty officers are required for traffic control at intersections, the variance in the paid duty surplus is dependent on the level of road construction activity this summer. The next quarterly report will likely reflect increased activity.
g) Alarm Revenue
A small surplus of $50K is being projected for 2013 alarm revenue based on the actual volume of false alarm calls compared to the expected volume used in the budget.
Horizon Issues
As of this report, there are two issues on the horizon that may create pressures going forward in 2013. The first matter relates to indemnification costs. The Ottawa Police Association collective agreement provides indemnification for officers in certain legal situations. Depending on the results of current legal proceedings, significant pressures may arise in the next quarter which may add pressure to 2013.
The other item relates to the Collision Reporting Centre revenues for 2013. The launch of the automatic payment plan was delayed by 4 weeks due to technical issues, with the full implementation expected later this year. These factors have impacted the revenue in the first half of the year, however the revenue in the second quarter has been increasing and it is expected that this trend will continue for the remainder of the year.
Staff will monitor these issues closely along with any others that may develop, and provide 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 2nd Quarter Financial Report – Summary by Directorate
In this report, the compensation budget base in each directorate has been adjusted to reflect the 2011 and 2012 settlements. The actual costs have been distributed to each of the directorates as well. However, due to the difficult and time consuming process, the accrued provision for the settlement remains as a lump sum adjustment in Corporate Accounts rather than being distributed to each of the other directorates as well. This explains the large credit in Corporate Accounts.
§ Annex B, which provides a list of all contracts awarded by the Chief that exceed $25,000;
Staff have revised this Annex to reflect a new classification of the purchase orders issued under the Chief’s delegated authority of $25,000. This classification is similar to the City’s and summarizes the transactions from April to June. In total, $1.6m in purchase orders were issued in the 2nd Quarter, of which $726k was spent on Professional Services. In addition to these purchase orders, a purchase order was issued to the Real You Inc. for $300k as authorized by the Board in March 2013.
§ Annex C, 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 C also indicates which projects are being closed and the money returned to source, or any deficits funded from same.
Annual Reporting Requirements
As well, Policy CR-4 of the Ottawa Police Services Board Policy Manual, Asset Management, requires that, on a yearly basis, the Chief shall:
- Provide a report to the Board listing the assets assigned to the OPS and their Net Book Value.
- Report on one category of real assets on a rotational basis to include:
a. Value
b. Expected useful life
c. Annual maintenance cost
d. Replacement plan
e. Disposal options.
In order to streamline the reporting of financial information to the Board related to compliance with various finance oriented policies, it was determined that the asset management reporting for the prior year would be incorporated within the 2nd quarter report. Previously this information was contained in a separate report to the Board, with identical timing with the 2nd quarter report. The necessary information to formulate the report is not available any earlier thereby precluding it from being reported on in a prior quarterly report.
The first requirement of the policy is satisfied in Annex D, entitled “Summary of Assets Assigned to Ottawa Police Service”. This summarizes all the assets assigned to the OPS and the associated net book value for the 4 year period 2009 to 2012. The assets are divided into 5 categories and have a total net book value of $61.8 million at December 31, 2012, which is an increase of $2.2 million from 2011.
Annex E meets the second requirement, to report on one category of assets on a rotational basis. This year Police Equipment has been chosen, so Annex E provides a summary of the equipment that is assigned to OPS. It includes the net book value, average expected useful life, the annual maintenance cost and disposal options. The net book value of this type of equipment is $0.5 million at December 31, 2012 and mainly relates to Forensic and Tactical equipment. Replacement of this equipment is planned with “ever-greening” programs whereby OPS sets aside a specific amount of money to replace a portion of these assets each year in order to smooth out the purchase cost over multiple budget years. These funds are provided from within the OPS’s annual capital plan, under the project heading of Specialized Equipment.
Additionally, the Chief is required, under Policy CR-4, to monitor and report on unusual risk management trends related to assets. Some of the assets detailed in the Annex E have reached or are very near the end of their useful lives, therefore they will require upgrading or replacing over the next few budget cycles. Continued use of the “ever-greening” program in this category will allow for the replacement of these assets. The OPS has successfully used this system in the past three years to replace some Imaging Services Equipment. This practice is particularly relevant now more than ever with the current fiscal restraint over budget increases.
Also, generally speaking, keeping abreast of emerging technological trends is always considered a horizon issue, particularly with regards to Imaging Services and media storage/backup systems.
CONSULTATION
Not applicable.
FINANCIAL STATEMENT
There are no financial implications.
CONCLUSION
The OPS is identifying several pressures and possible solutions in the second quarter report, based on the information that is known at this time. The analysis shows a projected breakeven position by year end.
In October, staff will present the OPS’ financial position as at 30 September 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 Acting Chief Ed Keeley on behalf of)
Charles Bordeleau
Chief of Police
Attach (5): Annex A: 2nd Quarter Financial Report – Summary by Directorate
Annex B: Purchase Orders Issued Under Delegated Authority
Annex C: Capital Budget Works in Progress
Annex D: Summary of Assets Assigned to Ottawa Police Service
Annex E: Summary of Police Equipment Assigned to Ottawa Police Service