Planning and Environment Committee /
Comité de l'urbanisme et de l'environnement
and Council / et au Conseil
February 1, 2010
/ le 1 février 2010
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 : Dixon Weir, General Manager,
Environmental
Services/Services environnementaux
(613)
580-2424 x22002, dixon.weir@ottawa.ca
SUBJECT:
|
AUDIT
REPORT - FINANCIAL STATEMENTS FOR IN-HOUSE SOLID WASTE COLLECTION - 2009 |
|
|
|
OBJET :
|
RAPPORT DE VÉRIFICATION – ÉTATS FINANCIERS POUR LA COLLECTE
DES DÉCHETS SOLIDES PAR LA VILLE - 2009 |
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.
City of
Ottawa Council approved and awarded one zone (Zone C3) of the six-year
collection contract (June 2, 2006 through May 31, 2012) to City Staff (hereafter
referred to as “In-house collection group”) following a managed competition
process that was overseen by a fairness commissioner.
In approving the use of the In-house collection group for Zone C3, 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 12 months ended May 31, 2009, 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.
Financial Results
As in prior years, the methodology used by management to prepare the financial statements is consistent with the Managed Competition Protocol and the 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:
1. this is an “going concern” operation;
2. this is a unit-based contract;
3. expenditures and revenues are recorded on an accrual basis; and
4. all incremental costs are included.
The Statement of Operations of the In-house collection group for the 12 months ended May 31, 2009, was audited by Ernst & Young LLP, the City’s external auditor. Their audit was designed in accordance with the 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 provided in Document 1.
The In-house collection for Zone C3 resulted in an operating surplus for Year 3 of $243,282 and a cumulative operating surplus to residents of $996,496 since the contract started in 2006.
Table 1 below presents the current and total contractual, operational and overall savings to area residents achieved by the In-house collection group. The contract is structured to be paid at the bid unit rate for the actual tonnage collected.
Table 1: Financial Performance of the In-house Collection Group
|
|
Current
Contract |
Current
Contract |
Current
Contract |
Total
Savings |
|
|
Year 1 |
Year 2 |
Year 3 |
|
|
|
2006-2007 |
2007-2008 |
2008-2009 |
|
|
Savings from City Bid |
$1,101,647 |
$
977,689 |
$731,338 |
$2,810,674 |
|
Additional Savings from In-house Collection
Operations |
$ 254,367 |
$
498,847 |
$243,282 |
$ 996,496 |
|
|
|
|
|
|
|
Total Savings |
$1,356,014 |
$ 1,476,536 |
$974,620 |
$3,807,170 |
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 cost minus actual cost = operating savings). The total current savings of $3,807,170 plus savings of $1,474,641 from the last contract total $5,281,811. The overall actual average cost per tonne of all material collected for the In-house collection group in 2009 was $87.78, as shown in Schedule 1 to the Statement of Operations, compared with $89.04 for the other four collection zones.
Year 3 operating savings result from the average age of the waste collection fleet, efficient route optimization, managed labour costs, and the productivity of dedicated and experienced staff.
Performance Results
In addition to the audited Statement of Operations for the In-house collection group, 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 3.
Ongoing qualitative analysis is conducted to ensure that residents receive the appropriate service level and that costs related to their response are minimized. If a resident calls 3-1-1 with a service complaint, a work order is issued to the appropriate contractor for resolution. Monthly reports are prepared for each service provider, including the In-house collection group, illustrating their performance and assisting in identifying trends that require attention.
Table 2 - Solid Waste Collection – Customer
Service Requests
|
Call
Type |
In-house Services Zone C3 |
%
of City Total |
Contracted Service (Zones C1, 2, 4 & 5) |
%
of City Total |
City
total |
|
|
|
|
|
|
|
|
Black Box collection |
680 |
25.8 |
1,954 |
74.2 |
2,634 |
|
Blue Box collection |
320 |
21.4 |
1,177 |
78.6 |
1,497 |
|
Garbage collection |
865 |
27.5 |
2,275 |
72.5 |
3,140 |
|
Leaf & Yard collection |
524 |
22.9 |
1,762 |
77.1 |
2,286 |
|
Total Calls/year |
2,389 |
25.0 |
7,168 |
75.0 |
9,557 |
|
|
|
|
|
|
|
|
Households |
45,997 |
17.6 |
214,694 |
82.4 |
260,691 |
|
|
|
|
|
|
|
|
Average
daily Service Requests per 1,000 households |
1.0 |
|
.65 |
|
.7 |
Both the In-house and the private sector zones experienced decreases in calls over the Year 2 figures (June 1, 2007 to May 31, 2008). This is due to monthly data review and residents becoming familiar with year-to-year service level changes, including the implementation of the new contracts on June 5th, 2006, and the implementation of the LCBO bottle return system which began in February 2007.
In Year 3, the In-house collection group received an average of 1 call per 1000 homes per day or 52 calls per 1,000 homes/year. The main issues justifying the difference in call type data are:
1. The In-house collection group provides service in the urban core where calls are related to property standards and waste issues are historically higher than in suburban and rural areas; and
2. Many homeowners in the contracted service areas (exact number not tracked) call the contractor providing service directly, rather than the City’s call centre, to have complaints resolved.
RURAL IMPLICATIONS
There are no rural implications from this report.
This report was prepared in collaboration with the Financial Services ISCS Unit and the Solid Waste Operations branch.
COMMENTS BY THE WARD COUNCILLOR
Councillors for the affected wards were not consulted as
this report is for information only.
There are no legal/risk management impediments to receiving this report.
This report is in accordance with the Service Delivery priority to “Deliver agreed to level of service at the lowest possible cost.”
N/A
There are no financial implications from this report.
City Council to receive this report for information.