HomeMy WebLinkAboutFIN-10-139 - Interim Financial Statements as of June 30 2010REPORT
REPORT TO:
Councillor B. Vrbanovic, Chair, and Members of the Finance
and Corporate Services Committee
DATE OF MEETING:
August 23, 2010
SUBMITTED BY:
Dan Chapman, General Manager of Financial Services and
City Treasurer
PREPARED BY:
Roger LeBrun, Manager of Accounting
Cindy Smith, Director of Financial Planning
WARD(S) INVOLVED:
All
DATE OF REPORT:
August 17, 2010
REPORT NO.: FIN-10-139
SUBJECT:
INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2010
RECOMMENDATION:
For information
BACKGROUND:
These interim financial statements for the six months ended June 30, 2010 are provided to
update Council on City expenditures and revenues compared to the 2010 budget and to explain
significant variances. The report includes schedules for Municipal Enterprises as well as
supplementary information related to investment income and tax arrears. This is the first of
three such reports for 2010, with the next reports scheduled for September and December
results.
REPORT:
Operating Fund – City (Schedule 1)
The report includes an asterisk to highlight budget areas with year-to-date variances in excess
of 10% and $50,000. Staff has analyzed these variances and, unless noted in the projected
year-end column, the year-to-date amount results from timing differences between actual
activity and budget calendarization. The actual revenue and expenditures for the six months
ended June 30, 2010 have not been adjusted for timing differences, such as unrecorded
liabilities, and therefore should be viewed with that in mind.
The projected year-end deficit is $2,500,000 which equates to a negative variance of 1.8% on a
$138,000,000 annual operating budget. Some of the key variances projected to the end of the
year are as follows:
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Community Services/Operations - it is estimated that the Operations division will be over
budget by $470,000. The primary causes pertain to increased road maintenance and
litter pickup expenditures due to a shorter winter season as well as increased downtime
as a result of inclement weather and vehicle breakdowns. The negative variance has
been partially offset by less work required in downtown maintenance as a result of King
Street reconstruction.
Corporate Services/Bylaw – parking fine revenue is expected to fall short of budget by
$100,000.
Corporate Services – unbudgeted retroactive pay adjustments in both Facilities
Management and the Legal divisions have resulted in a projected overexpenditure of
approximately $185,000.
DTS Planning/Engineering recoveries – To date, an increase in permit and sign
revenues will have a positive effect of approximately $150,000 relative to budget.
DTS/Parking – Due to the delayed closing of the library lot and an increased demand in
hourly and monthly parking, revenues are expected to exceed budget by approximately
$167,000.
Staff attempt to provide the most realistic estimates based on the information that is known at
the time of preparing the year-end projection, however there are some areas with significant
budgets that are difficult to predict at this time. This uncertainty has the potential to alter the
projections significantly and these areas will continue to be monitored closely. These include
the following:
Supplementary taxes and tax rebates/refunds/reductions – with a net budget of
$800,000, much of the supplementary billings and rebates/refunds/reductions occur very
late in the year once information has been processed by MPAC. No surplus or deficit is
currently projected in this area, however due to the potential for future tax writeoffs or
rebates, this line item has the potential to deviate substantially from the budgeted figure.
Investment income – staff has calculated the annual budget for investment income
based on a 5 year history on both rate and average balance. In recent years, the rate
had contributed to substantial increases in investment income over budget. With recent
market corrections and adjustments, investment income is not expected to return the
same surplus as in previous years and is only expected at this point achieve a fraction of
last year’s returns. These factors give rise to a negative variance of over $900,000.
Gapping – the annual budget for gapping is $2,300,000 and there is a significant
negative variance of $1,000,000 projected. This figure is difficult to predict due to the
variable nature of staff changes.
The projected deficit of $2,500,000 will be closely monitored for the remainder of the year. As
more refined projections are developed, staff will be able to assess the need for further action
and mitigation efforts and will update Council as part of the next interim report.
Deficit Mitigation
The pressures of the economic downtown of 2008 and 2009 have continued to impact the
results of 2010 in various areas of the City, with the largest impact stemming from very low
interest rates. As a result of the projected deficit, along with the fact that the Tax Stabilization
Reserve Fund is not in a position to fund a large deficit, staff is taking action in the following
three areas to attempt to mitigate the amount of the deficit:
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Corporate Management Team will be reinstituting a series of temporary policies similar
to those implemented in 2009 which are intended as guidelines for decision-making in
day-to-day work with the goal of reducing expenses. They cover areas of controllable
spending including staff training and conferences, meeting and meal expenses,
memberships and subscriptions, overtime and on-call, advertising, publicity, promotions
and printing.
A review of existing capital projects will be undertaken to identify the potential to close
out unexpended capital balances. Normally these funds would be transferred to the
capital pool to fund new capital projects through the annual budget cycle.
Staff is accelerating a review of the gapping policy and guidelines in order to determine if
additional amendments to the policy will be required for the remainder of 2010 in order to
reduce the projected negative variance in this area.
The impact of these policies will be monitored on an ongoing basis to ensure that the
corporation is achieving appropriate savings in these areas.
Building Enterprise (Schedule 2)
Building permit activity has increased significantly in the first six months of 2010 with an
increase of over 100% compared to the same time last year. This has resulted in a YTD surplus
position of $1.1 M. Any net surplus or deficit from the operating fund will be transferred to the
Building Enterprise Reserve Fund.
Golf Courses (Schedules 3 and 4)
Doon Valley and Rockway Golf Courses are $91,000 below budgeted net revenue year to date,
primarily due to poor weather conditions and extreme humidity for the golf season year to date.
In addition, the economic conditions have negatively affected the number of rounds played as
well as the number of memberships sold.
As of June 12, Doon Valley opened the 9-hole and 18-hole courses so the results depicted in
Schedule 3 are primarily a result of Doon Valley operating as an 18-hole course. Doon Valley is
also expected to have the driving range open this month and the 9-hole Pitch and Putt is
scheduled to open in September which is well ahead of the planned opening date of Spring
2012. Both of these openings should have a positive impact on the operating revenues for the
remainder of 2010.
An extensive internal review of both golf course operations is currently underway, including a
review of fees, in order to better position both courses in a long-term sustainable manner.
Water Utility and Sanitary Sewer Utility (Schedules 5 and 6)
The Water Utility and Sanitary Sewer Utilities have both achieved 95% of their respective YTD
budget targets. The Water Utility fell short of budget projections by approximately $65,000
overall.
The Sanitary Sewer Utility fell short of budget projections by $878,000. Sewer surcharge
revenues are down as a result of slightly lower water billings, however the cost of sewage
processing in on target. Sewer maintenance expenditures are slightly higher than budget due to
a mild winter which allowed repairs and maintenance to start earlier than in previous years.
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Gas Utility (Schedule 7)
The Delivery company gross profit amount is trending as expected relative to budget as of May
31, 2010. Both revenues and expenses are lower than budget due to a decrease in
consumption. The reduction in revenues however, has been partially offset as a result of the
rate being higher than that which was used in the budget. Further expense savings were
realized in the first five months in other areas within the Delivery company that did not relate to
gas purchases or the cost of gas transportation. Other programs are performing positively
compared to budget, due to cost savings to date in Appliance Services, and increased revenues
in the Rental Water Heater program.
The Supply Company revenues and expenses are also lower than budget as a result of lower
than expected consumption. The decrease in revenue was partially offset by the fact that the
rate charged to customers was higher than the budgeted rate, offsetting the impact of the large
consumption decrease. As the average price of gas did not significantly vary from the budgeted
price, the full reduction in expenses is due to the decreased volume of gas sold. Effective July
1, 2010, the customer rate for the supply of natural gas has been reduced, bringing it more in
line with the purchase cost, which is expected to bring the Accumulated Surplus as of May 31,
2010 closer to a break even position by December 31, 2010.
Investment Report (Schedule 8)
Investment income is expected to have a negative variance for 2010 of approximately $900,000
rd
due to market rates remaining below 1%. Rates are expected to only increase slightly in the 3
th
and 4 quarters of 2010.
Taxes Receivable (Schedule 9)
Taxes receivable of $102.7 M at June 30, 2010 was $4.1 M higher than at the same time in
2009. Taxes due from previous years billings increased by $0.9 M.
FINANCIAL IMPLICATIONS:
Financial implications are discussed above and detailed in the attached schedules.
COMMUNICATIONS:
N/A
ACKNOWLEDGED BY:
Dan Chapman (General Manager of Financial Services and City
Treasurer)
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