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Request for Decision

2015 Water Wastewater Variance Report



Presented To: Audit Committee
Presented: Tuesday, Jun 21, 2016
Report Date: Thursday, Jun 02, 2016
Type: Routine Management Reports



Ce rapport est disponible en anglais seulement conformément aux exigences de la Politique sur les services en français de la Ville du Grand Sudbury.
Signed By

Report Prepared By
Dion Dumontelle
Co-ordinator of Finance, Water Wastewater
Digitally Signed Jun 2, 16

Recommended by the Department
Ed Stankiewicz
Acting Chief Financial Officer/City Treasurer
Digitally Signed Jun 2, 16

Recommended by the C.A.O.
Ed Archer
Chief Administrative Officer
Digitally Signed Jun 8, 16

Resolution

THAT the City of Greater Sudbury accepts the December 31, 2015 Water Wastewater Variance Report dated June 2, 2016 from the Acting Chief Financial Officer/Treasurer and the General Manager of Infrastructure Services outlining the audited year end position.

YEAR END VARIANCE

The year end net under expenditure for Water and Wastewater Services is $11,694 as outlined in Schedule A.  Water is recording an over expenditure of $2,146,008 while Wastewater is in an under expenditure of $2,157,702.  In accordance with the By-law, the water over expenditure was funded by a contribution from the Water Capital Financing Reserve Fund and the wastewater under expenditure was contributed to the Waste Water Capital Financing Reserve Fund. 

The major contributors to this over expenditure are:

Category

Favourable/(Unfavourable)

User Fees

$(1,390,823)

Cont’n from Reserve Funds

$(1,219,119)

Other Revenues

269,340

Salaries and Benefits

$1,067,224

Materials

$1,302,827

Purchased Services

$(1,832,399)

Debenture and Insurance

$1,570,312

Internal recoveries

271,076

Other net variances

$(50,132)

 

 

Total 2015 Under Expenditure

$11,694

VARIANCE EXPLANATIONS

User Fees

Actual user fee revenues are below budgeted amounts. For 2015 the estimated consumption was budgeted at 14.2 million cubic metres while the actual consumption for 2015 was $13.7 million cubic metres.  For 2016 the budgeted consumption has been set at 14.0 million cubic metres.

Contribution from Reserve Funds

During the spring of 2015, staff prepared a report requesting additional funds of $1.75 million to cover the higher than usual anticipated costs of repairing service cuts resulting from the severely cold winter.  The actual costs of these repairs were $1.2 million less than anticipated and as such did not require the full draw from reserve funds.

Other Revenues

Other revenues favourable variance of $269,000 is due to higher than anticipated volumes of hauled liquid waste from commercial customers as well as unbudgeted revenues from sludge received from other municipalities and hydro costs recovered from the biosolids operator. 

Salaries and Benefits

Salaries and benefits are under budget by approximately $1,067,000.  The division experienced staffing vacancies from a variety of factors such as short and long term employee illnesses, and turnover.  For many of these specialized vacancies, the division has been unable to fill the vacancies on a timely basis. This problem is particularly acute for short term, temporary, or limited vacancies as candidates with the required certifications and other qualifications are not forthcoming for such transient opportunities.  In addition, the use of overtime was significantly lower than budgeted contributing to the under expenditure. 

Materials

Materials were under budget by $1,302,000.   Inventory was counted and recorded for the first time since amalgamation.  The value of this inventory resulted in a one-time favourable entry of $850,000.  Chemicals were over budget by $100,000 while other materials related to break down repairs and plant maintenance were under budget by $550,000.

Purchased Services 

Purchased service costs were over budget by $1,832,000 and the contributing factors to this budget overrun are:

  1. Due to staff vacancies, certain repair work was directed to contractors.
  2. The increased repair rate related to the age of the infrastructure
  3. The 2015 winter was unusually cold leading to increased number and cost of repairs. As well, the wet fall left the ground saturated when the frost came creating conditions conducive to breaks.

The budget overages occurred as follows:

  1. There were 184 watermain breaks to the end of December, compared to141 breaks for the 2014 calendar year.  In addition, the average cost per watermain break repair was $21,500 which was more than $3,000 higher than the previous 3  year average. This resulted in this line item being over budget by $1,506,000.
  2. Frozen water services thawing repairs performed by contractors numbered approximately 562 .  This additional expense amounted to approximately $975,000 in unanticipated expenditures over budgeted amounts.
  3. All other repair work to water related infrastructure (hydrants, curb boxes, valves etc) was over budget by $900,000.
  4. Sewer main and manhole repairs were over budget by only $155,000.

The cumulative effect of the above four items is an over expenditure of $3,536,000.

Offsetting these overages were the following underages:

  1. The aforementioned repair costs to service cuts were $1.2 million less than anticipated.
  2. The Biosolids plant operating costs were conservatively budgeted to start at an earlier date than scheduled. The effect was a under expenditure of $472,000.

The cumulative effect of these overages and undergoes is a net overage of $1,832,000 in this line item.

Given the high demand on City staff time for regularly scheduled operations and maintenance activities, which in most cases have regulatory implications, more than half of the emergency watermain and sanitary sewer repairs are being performed by contractors.  To minimize the disruption to citizens affected by the lack of water these are most frequently performed after hours when City crews are unavailable. Consequently purchased services are higher but are partially offset by savings in salaries and materials.

Debentures and insurance

The budget underage of $1,570,000 is due to the fact that the debt repayment related to the Biosolids plant was budgeted for the whole year but did not start until May when the plant commenced operations.  Additionally, the actual principal borrowed and the interest rate on the external debt were both lower than budgeted which further contributed to the savings in this category

Internal Recoveries

The underexpenditiure in this category is due primarily to internal direct charges from support departments such as engineering, and administrative services coming in at less than budgeted amounts. 

Conclusion

In accordance with the By-law, the water over expenditure has been funded by a contribution from the Water Capital Financing Reserve Fund and the wastewater under expenditure was contributed to the Waste Water Capital Financing Reserve Fund.