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HomeMy WebLinkAboutFIN-08-094 - Financial Report as of May 31, 20081 KITC~~R ' • Financial Services Report To: Councillor B. Vrbanovic, Chair, and Members of the Finance and Corporate Services Committee Date of Meeting: August 11, 2008 Submitted By: Dan Chapman, General Manager of Financial Services & City Treasurer Prepared By: Roger LeBrun, Director of Financial Planning & Reporting Ward(s~ Involved: All Date of Report: July 9, 2008 Report No.: FIN-08-094 Subject: FINANCIAL REPORT AS OF MAY 31, 2008 RECOMMENDATION: For information BACKGROUND: This interim financial report is provided to update Council members on City spending and revenues compared to the 2008 budget and to explain significant actual and projected variances. On March 31, 2008, it was determined at Finance and Corporate Services Committee that staff would only prepare schedule 1 (tax based summary) for the May interim financial statements in order to create capacity for Financial Planning & Reporting Staff to support inventory collection and valuation activities as well as report creation for the Delta Project. In addition, report FIN-08-050 was presented to Finance and Corporate Services Committee on May 12, 2008 which presented various options to mitigate the projected deficit of $1.2M due to winter control. All of the recommended net expense reductions that were presented in the report were supported other than the overtime reduction for grass cutting. The result was $970,000 of the $1.2M projected winter control deficit was mitigated, leaving $230,000 of additional savings to be found. Details of the items proposed in the report can be found in Appendix A. REPORT: O~eratina Fund - Citv (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 five months ended May 31, 2008 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 projected to be $163,000 which equates to an approximate negative variance 0.1 % on a $127M annual operating budget. This is a decrease of $67,000 over the variance of $230,000 projected in FIN-08-050. In addition to winter control and the deficit mitigation strategies highlighted in Appendix A, some of the key variances projected to the end of the year are as follows: Enforcement fine revenue - it is estimated that fine revenue will be below budget by $150,000. Staff within Corporate Services will be coming forward shortly with a proposal to increase various fines for 2009. Fuel costs - it is estimated that the cost of fuel on the tax-based operations will exceed budget by approximately $300,000. It is estimated that volumes have increased over last year by approximately 11 % and that prices have increased by approximately 25% relative to the budget. (Note: $119,000 of this increase has already been taken into consideration as part of the $1.2M winter control deficit.) Gapping -the YTD actual for gapping revenue is currently $418,000 above budget. Staff will analyze this budget line as the year progresses to develop a refined year end projection. Staff attempt to provide the most realistic estimates based on the information that is known at the time when preparing the year-end projection, however there are some areas with significant budgets that remain difficult to predict as of this point. This uncertainty has the potential to alter the projections significantly and these areas will be monitored closely on an ongoing basis. These include the following: Supplementary taxes and write-offs - with a net budget of $1.5M, much of the supplementary billings and write-offs occur very late in the year once information has been processed by MPAC. No variance has been estimated at this time. In 2007, there was a negative variance of $978,000 for this budget line. Penalties and interest - on a budget of $2.6M, this figure is difficult to predict due to several postings that are pending in the tax/utility system. In addition, tax arrears have been declining in recent years which could lead to declining interest income. No variance has been estimated at this time. In 2007, there was no variance for this line. 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 of over 100 basis points, investment income is not expected to return the same surplus as in previous years and is only expected at this point toout-perform budget by $75,000 (2007 - $952,000}. Gapping -the annual budget for gapping is $2.2M and there is a YTD positive variance of $418,000. This figure is difficult to predict due to the variable nature of staff changes as well as the implications of the pay structure adjustments and the fire arbitration ruling. Staff will continue to monitor this budget line and be in a better position by the August interim financial report to project the annual variance. The projected deficit of $163,000 will be closely monitored throughout the remainder of the year. As more refined projections are made, staff will be able to assess the need for further action and mitigation efforts and will update Council as part of the August interim report. FINANCIAL IMPLICATIONS: Financial implications are discussed above and detailed in the attached schedule. All amounts are unaudited and do not reflect timing differences. Actual results may differ from amounts projected. 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