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City Finances: Police Board Needs to Take Financial Responsibility

The Police Services Board has several healthy reserves available to cover certain costs. Some of those are for Vehicle Replacement costs, Sick leave, Tax Stabilization, Capital Expenditures, Vacation Pay, Police Litigation, Special Events and Police rewards. These reserves are intended to spread out fluctuations in costs or reduce pressures in current operating expenditures.

The actual balance in the reserves is reducing. Reserves totaled $12,421,938 at the end of 2011 whereas the projected balance at the end of 2012 is $10,017,530. One of the reasons for the reduction is that the
reserves are not earning the amount of interest that they could. Each year, an amount is set aside in the current operating budget for costs covered by certain reserves. That amount should be transferred to the reserves at the beginning of the year so that it can be invested and earn interest. When the actual expenditures are known at the end of the year, those expenditures are to be deducted from the reserve. During the period 2007 to 2012 it is apparent that cash is not being transferred to the reserve at the beginning of the year. Instead, at the end of the year, there are in and out entries for the actual costs incurred. The effect is that a significant amount of interest is lost.

Another issue with the reserves is that some appear to be completely untouched such as Sick Leave ($5,749,208), Vacation Pay ($1,341,078), Police Litigation ($237,558), Special Events ($103,751) and Police Rewards ($147,154). Is it possible that some of the current budget problems could have been avoided had the costs been flowed through the reserves as intended?

It is my opinion that the Police Services Board was not given the opportunity to do its job with respect to the current budget. The 2012 financial results (an operating loss of $286,491) were not sent to the PSB before they were sent to the City of Hamilton General Issues Committee (GIC) for approval. Since police board staff sent the results directly to the City, police board members did not have an opportunity to examine the deficit and question why it occurred considering the fact that the years 2011 and 2010 had healthy surpluses. The PSB is supposed to be the first level of approval before the financial results are sent to the City for final entry into the consolidated financial statements

This break with procedures eliminates the authority of the PSB and reduces their responsibility to oversee financial results. In addition, and more importantly, if financial results are not examined at year end, how can the following year’s budget be approved in good conscience? There is an absolute relationship between budgeting for the future and accounting for the present and past. They are interdependent. The budget is a reflection of financial information from previous years as well as a plan for future years. Councillor Whitehead, a PSB member, repeatedly questioned whether police operating expenditures were aggrandized. The Chief has not provided explanations to the PSB Board, nor can the Deputy who oversees operations.

The PSB could have hired 42 new uniformed officers and civilians within the threshold amount as established by the City Council. The cost of new hires taken on in 2013 will not show its full impact until the 2014 budget which was Terry Whitehead’s concern. We have not seen the end of the impact of the 2013 budget.

The 2013 budget received enough coverage through electronic and print media. However, what has not been sufficiently examined is why current operating pressures continue to increase each year. The budget increase affects each citizen in the form of its levy impact. The PSB, without knowing or understanding their own healthy financial position in the form of large reserve funds, created a jaundiced environment, divisions within the PSB itself, and divisions within City council.

The Spectator’s view in May, 2013, was that it was “Time for a new look at police governance”. I hope Councillor Sam Merulla follows through with his motion to limit wasteful spending.

The 2013 police budgeting, accounting anomalies and individual idiosyncrasies have tarnished our police force image. I hope our police force image will be restored as we go along in 2013

Shekar Chandrashekar, Retired civic employee

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