Report to: General Committee                                               Date of Meeting: March 17, 2008

 

 

SUBJECT:                          2007 Review of Operations

 

PREPARED BY:               Joel Lustig, Director of Financial & Client Services

                                            Andrea Tang, Manager of Financial Planning

 

 

 

RECOMMENDATION:

THAT the report dated March 17, 2008 entitled “2007 Review of Operations” be received.

 

AND THAT the final 2007 Operating Surpluses for the Town of Markham (“Town”), Building Standards and Waterworks Departments be transferred to the Town’s respective reserves in accordance with the Town’s reserve policy. 

 

EXECUTIVE SUMMARY:

For the year ended December 31, 2007 the operating budget results (excluding Waterworks and Building Standards) reflect a net favourable variance of $0.244M.  The $0.244M favourable variance is comprised of $1.552M favourable variance in Revenues and ($1.308M) unfavourable variance in Expenditures, as shown below:

 

 

 

 

 

Further details of all variances are available in the Discussion section of this report.

 

Waterworks ended 2007 with a $0.046M favourable variance.  This variance was mainly due to favourable variances of $0.325M in personnel costs, $0.323M for purchased services and $0.216M in other revenues that had been partially offset by an unfavourable variance of ($0.813M) for the sale and purchase of water.
 

Also, at the end of the year, Building Standards had a favourable variance of $0.663M mainly due to a favourable variance of $0.675M in personnel expenses, offset by an unfavourable variance of ($0.068M) in Revenues.

 

FINANCIAL CONSIDERATIONS:

The financial results are unaudited and the audited statements are expected to be available by mid April, 2008.

 

The final 2007 operating surplus for the Town, Building Standards and Waterworks Departments will be transferred to the Corporate Rate Stabilization Reserve, Building Fee Reserve and Waterworks Reserve respectively in 2008 in accordance with the Town’s reserve policy.

 

1. Purpose                                                                                                                                                                                                                                                         2. Background                                                                                                                                                                                                                                                         3. Discussion                                                                                                                                                                                                                                                         4. Financial                                                                                                                                                                                                                                                         5. Environmental

 

6. Accessibility                                                                                                                                                                                                                                                         7. Engage 21st                                                                                                                                                                                                                                                         8. Affected Units                                                                                                                                                                                                                                                         9. Attachment(s)

PURPOSE:

To provide an overview of the preliminary 2007 year-end financial results.

 

BACKGROUND:

On May 8th, 2007, Council approved the 2007 Budget of $301.077M (adjusted for the 2006 year-end surplus).  The 2007 budget consists of $151.419M in the Operating budget, $8.045M in the Building Standards budget, $50.146M in Waterworks budget and $91.467M in the Capital Budget.

 

The Building Standards and Waterworks Operating Budgets are shown separately from the Town’s Operating Budget as they are user fee funded (e.g. Building Permit Revenue and revenues based on water consumption, respectively) and separate reserves have been established for each.

 

Each quarter, departments provide details of significant financial variances (actual to budget) in their areas. The variances are reviewed, substantiated and summarized by the Financial Planning department.  Minor variances are reviewed by staff, but not discussed in detail in this report.

 

 

OPTIONS/ DISCUSSION:


YEAR-TO-DATE OPERATING BUDGET VARIANCES:

 

At the end of the year, the 2007 operating budget results (excluding Waterworks and Building Standards) reflect an overall $0.244M favourable variance.  The $0.244M favourable variance is comprised of favourable variances in three main areas of the Town’s operating budget:

 

            $1.552M favourable variance in Revenues (Section 1)

            $(0.051M) unfavourable variance in Personnel Expenditures (Section 2)

            $(1.257M) unfavourable variance in Non-Personnel Expenditures (Section 3)

            $ 0.244M

 

The remainder of the report provides more details of the variances above and provides details of the Waterworks and Building Standards year-to-date variance.

 

SECTION 1 – REVENUES

At the end of 2007, revenues were favourable by $1.552M due to the following:

 

 

Taxation Revenues

The favourable variance of $0.068M was mainly due to supplementary tax revenues, from additional supplemental billings made in 2007 based on the assessment rolls received from the Municipal Property Assessment Corporation (MPAC). 

 

Grants & Subsidy Revenues

The favourable variance of $0.267M in Grants and Subsidy Revenues was mainly due to additional funding received from WDO (Waste Diversion Ontario) and unbudgeted grants received by the Art Centers and the Museum.   

 

General Revenues

The favourable variance of $0.170M in General Revenues was mainly due to Investment Income.

 

User Fees and Service Charges

The $0.163 favourable variance was mainly due to:

·        favourable variance in Engineering of $0.811M,

·        favourable variance in Arts Centres of $0.120M, offset by

·        unfavourable variance in Planning & Design of ($0.250M),

·        unfavourable variance in Library Fees of ($0.106M), resulting from the delayed opening of Markham Village Library, and

·        unfavourable variance in Recreation Fees of ($0.230M) resulting from lower rentals and lower program registration across all facilities and closure of the Centennial Community Centre.

 

 

 

 

 

Other Income

The $0.884M favourable variance was mainly due to favourable variances in:

·        Financial services admin fees of $0.176M,

·        Sale of land and other assets $0.423M (to be transferred to reserves),

·        Varley Foundation Revenues of $0.058M, and

·        Recreation Sundry Revenues of $0.042M.

 

SECTION 2 – PERSONNEL EXPENDITURES

The 2007 personnel expenditure variance was ($0.051M) unfavourable:

 

 

The $1.481M favourable variance in full time salaries was a result of vacant positions which included full-time staff away on Long-Term Disability (LTD), sick leave or parental leave, and newly approved 2007 budgeted positions.  This variance was net of vacancies and an unfavourable variance in Fire overtime due to an average 5 vacancies during the year. 

 

This favourable variance of $1.481M in full time salaries was offset by:

·        an unfavourable variance of ($0.394M) in part time and contract salaries,

·        an unfavourable variance of ($1.870M) due to year end accounting accruals, currently not included in the Operating budget. Specifically, $0.368M in vested sick leave pay provision for the firefighters and $0.872M provision for post retirement benefits (based on actuarial valuations) were booked in 2007. The year end accounting accruals were partially offset by favourable variances in Allowances and Other Remunerations of $0.200M.

 

The 12 month period ended with a gross benefit favourable variance of $0.980M, resulting from the vacancies as described above and a one time Long Term Disability Premium Holiday of $0.389M.

 

Further, the 2007 budget includes $0.653M of annual salary gapping savings which have been fully allocated to the individual business units.

 

SECTION 3 - NON-SALARY EXPENDITURES

At the end of 2007, non-salary expenditures were unfavourable as outlined below:

 

Purchased Services

The ($0.028M) unfavourable variance in Purchased Services was due to variances in the following accounts:

  • ($0.587M) unfavourable variance in Roads related to Winter Maintenance,
  • ($0.297M) unfavourable variance in Legal Services related to the use of external counsel on several initiatives; partially offset by,
  • $0.244M favourable variance in Street Light Hydro resulting from the move to Spot rate in the second half of 2007,
  • $0.456K favourable variance in utilities due to lower rates and lower consumption resulting from Centennial and Markham Village Library being closed for reconstruction,
  • $0.134M favourable variance in HR recruitment fees due to use of more efficient recruitment methods.

 

Materials & Supplies

The unfavourable variance of ($0.366M) was mainly due to variances in the following accounts:

  • ($0.333M) unfavourable variance in winter maintenance salt and sidewalk accounts,
  • ($0.096M) unfavourable variance in fuel and vehicle parts.

 

 

 

 

Transfer to/from Reserves

The unfavourable variance of ($0.970M) represents higher transfers to reserves than budgeted. The variance was mainly due to:

·        ($0.865M) higher transfer to Engineering Reserves due to favourable Engineering fees.

 

SECTION 4 - WATERWORKS

Waterworks reported a favourable variance of $0.046M at the end of 2007. (see Appendix 2).

This variance was mainly due to a favourable variance of $0.325M in personnel costs and $0.323M for purchased services. The reported variance is offset by an unfavourable variance of ($0.813M) in the sale and purchase of water, of which $1.000M is being withheld pending clarification on water purchases with the Region of York.

 

SECTION 5 – BUILDING STANDARDS

Building Standards reported $0.663M operating surplus at the end of 2007(see Appendix 3), which resulted in a transfer of $0.663M to Building Fee Reserve.

The year end favourable variance is due to the favourable personnel variance of $0.675M resulting from an average of 9 vacancies throughout the year. It is partially offset by insignificant unfavourable variances in revenue and non personnel expenditures.

 

FINANCIAL TEMPLATE (Separate Attachment):

Not applicable

 

 

RECOMMENDED

                            BY:    ________________________          ________________________

                                      Barb Cribbett, Treasurer                     Andy Taylor, Commissioner

                                                                                                Corporate Services

 

ATTACHMENTS:


Appendix 1 – Operating Budget - Financial Results for the Year Ended 31 Dec 2007

 

Appendix 2 – Operating Budget for Waterworks - Financial Results for the Year Ended 31 Dec 2007

 

Appendix 3 – Operating Budget Building Standards - Financial Results for Year Ended 31 Dec 2007