Amos Town Council Case

INTRODUCTION
The Town of Amos, a municipality in the north-west part of Quebec, has to address the continuous rise of its local police budget. Over the past five years, the Amos Police Force budget has increased at an annual rate of 5% (while the budgets of all the other town departments have increased by only 3%), and it currently represents 30% of the town’s annual budget. Regardless of these increases, over the same time interval the actual police expenditures have exceeded the allocated budget by as much as 4%.
PROBLEM STATEMENT
Faced with the trend of Amos Police Force’s continuous budget increases and expenditures exceeding allocated funds, the Town Council is considering whether to replace the existing police services with a contract
for police coverage from the Canadian Regional Police (CRP).
As a result, our consulting team was hired to assess the situation and propose a solution. As requested, this report contains the following: 1) A performance review of the Amos Police Force for 1997 using both financial metrics and non financial indicators 2) A quantitative and qualitative analysis of the CRP proposal 3) An evaluation of the town’s Management Control System 4) Conclusions and recommendations
PERFORMANCE REVIEW OF THE AMOS POLICE FORCE
Traffic control
Actual expenditures were $18,448 more than the budget and $13,948 over budget if we consider overtime. Similarly, the hours spent on this program were 5% above the budget. The two targets for this program were met: 94.1% of traffic offences were solved compared to the 90% target and the response time for traffic accidents was 4 minutes which is below the 5 minute target and much better than 8.5 min for CPMC. As such, the objectives of this program were achieved and Amos’ Police Force seems to be performing much better than both the CRP and CMPC average. It appears that greater importance was placed on this program than was planned. Indeed, 35% of constable time was actually spent on traffic control as compared to an expected 30%. This outcome was likely the main cause of the actual expenditures being over budget. It is unclear whether the goal to minimize traffic offences was met. Overall, Amos Police Force has efficiently achieved its traffic control goals, but at a cost higher than budgeted.
Non-traffic control
The variance between the actual and budgeted expenditures for this program was $8,704 over budget and $5,704 above the budget after taking into consideration overtime. Constables spent 42% of their time on this program, translating into a 2% increase above the budget. Nevertheless, the two targets of this program were met: 82% of all criminal and non-criminal offences were solved compared to the 80% target and the response time has been 4.2 min compared to 10.6 min for CPMC and a target time of 5 min. Since more constable time was spent on this program than was planned, the non-traffic control goals were met but at a cost higher than budgeted.
Safety and Prevention
Actual expenditures for the safety and prevention program were $8,746 less than the budgeted expenditures. The actual time spent on this program was 3% less than the planned time allocation of 10%. As a result, the performance of the program was directly impacted: 2.2 accident fatalities occurred per 1,000 population covered as opposed to a maximum target of 2, 35.8% of known offenders repeated their offences versus the 30% limit and 71.5% of commercial and public properties have been inspected against the 80% target. In general, while remaining within the budget, the Amos Police Force has not achieved any of its targets within the safety and prevention program and exhibited below average performance in comparison to CMPC.
Training and administration
Expenditures for the Training and Administration program were $11,701 less than budget and $13,201 below the budget after taking into account overtime. Officers spent only 16% of their time on this program versus the expected 20%. Consequently, each constable spent 18 days in police training as compared to the targeted 20 days. In addition, police reports were completed and filed within 22 hours of report request which is better than the 24 hours target and the CMPC’s average of 30hrs. It is difficult to analyze the achievements of this program due to fact that the Amos Police has achieved mixed results versus its targets in this program. One of the main goals of this program was to promote public confidence in the Amos Police Force. Not having enough training and facing a higher ratio of police constable per 1000 population (1:918 for Amos versus 1:866 for CMPC and 1:689 for CRP) will likely affect the public confidence in the local police force. In contrast, the lack of constable attrition (versus an 18.5% turnover ratio for CMPC and 17% for CRP) and a higher rate of unpaid community work per constable (10.9 h/month versus 8.5 h/month for the CMPC group and 4hrs for CRP) are positive elements to gaining public confidence. Overall, the Training and Administration program was within the budget but the goals were partially met.
CRP PROPOSAL In evaluating the proposal, both the quantitative and qualitative aspects were thoroughly examined.
The quantitative analysis examines both the operating cost of accepting the CRP proposal as well as the CRP performance based on 1997 statistical figures. The fee structure of the proposal is mainly composed of a flat fee of $325,000 and a per capita fee $10 both growing at annual rate of 2%. The assumption was made that the population of Amos will be growing at a rate of 1% annually to allow for the results in Appendix 1. Government grants were excluded from the revenue since the Town of Amos would not have its own police force. Also, all the miscellaneous receipts received by the Town Council would be given to the CRP for its administrative expenses. Hence, the cost of accepting the CRP proposal is budgeted to be $392,090, $400,254, and $408,598, as budgeted for 1998, 1999, and 2000 respectively. It is worth noting that the agreed upon lease expenses of $ 1,200/month for the next 3 years can be considered as sunk costs since they would be paid out whether or not the CRP proposal is accepted. If we assume otherwise, the budgeted costs mentioned above would be higher by $14,400. In examining the 1997 statistics of the police service performance targets, the CRP only met the targets set for the Training and Administration
program. Considering the qualitative factors, there is no guarantee that the costs will remain stable after the contract expires since the CRP proposal is for a 3 year term. It is also expected that there will be a loss of the personal heritage and service to the town since only two officers of the current police force will be hired by the CRP with a possibility of being transferred somewhere else. All this adds to job insecurities and a negative economic impact on the town. The quality of the policing service is also highly questionable since it will be done by “outsiders” to the town. Not having any headquarters in the town of Amos could lead to increased response time to incidents as well as more impersonal service. In addition, the town’s safety and crime prevention are negatively impacted by the fact that special effects coverage is not guaranteed, which also adds to the decrease in quality of the police service when compared to the town’s current situation. Overall, the CRP proposal seems undesirable due to its high operating costs and negative impact on the town’s economy and quality of service.
MANAGEMENT CONTROL SYSTEM The Town of Amos currently uses a program budgeting approach for managing the operations of its departments. For each program, Amos defines the goals, sets the targets and allocates the resources according to the weight of each program. Moreover, the town disposes of statistics for the Canadian Regional Police and the Canadian Municipal Police Commission which can be used to compare the results obtained from the Amos Police Force.
While the town’s management control system procedures and policies are deemed appropriate, the system is inadequately implemented. 1. The difference between the actual and budgeted expenditures is currently not being analyzed to identify the causes and avoid future overspending. 2. Overtime expenses for special events and holidays are not included in the budget which resulted in the police force exceeding its budget by as much as 4% over the past three years. If constables are required to provide these duties, then overtime should be included in the budget. 3. To prepare the operating budget for the upcoming year, the Amos Police Force adjusts the current year’s budget for inflation. However, not all expenses can be justified to increase by the rate of inflation. The budgeting process does not consider other influential factors and the needs of each program. 4. The capital budget is included in program expenditures as can be seen by the 1998 budget of $81,870 for the purchase of three new cruisers. Since not all departments require considerable annual capital expenses, the Town of Amos should establish a single capital budget for all town departments. 5. Police officers are currently not evaluated vis-à-vis the required program objectives and provided comparable statistics.
CONCLUSIONS AND RECOMMENDATIONS
Overall, it seems that the Amos Police Force successfully met the majority of its goals and targets set in 1997. In fact, had the overtime for special events and holidays been included in the annual budget, the operating savings would have been $2,295 (see appendix 3).
Nonetheless, we observe that a higher percentage of the budgeted constables’ time was spent on the traffic and non-traffic control programs, at the expense of the safety and prevention and training and administration programs. As a result, all objectives from the prior two programs were not met. However, due to the importance of the traffic and non-traffic control, this trade-off may have proven to be effective. In addition, even with lower emphasis placed on safety, prevention, training and administration, it is noted that statistics associated with these activities were relatively similar on average to CMPC and in some instances, better than CRP.

In cases where capital expenditures are included in the Amos Police Force operating budget, the CRP proposal appears to cost less during 1999 and 2000 than keeping the local police, as can be seen by annual town appropriation savings of $1,460 (when leasing expense is included) and $15,860 (when leasing expense is excluded) (see appendix 4). However, as comparable statistics show, if the town decides to replace the Amos Police Force, certain police programs may experience a lack in quality as well as require supplementary payment. As such, the quantitative and qualitative costs of the CRP proposal may offset its benefits.
In conclusion, we recommend that the elected Town Council keeps the local Amos Police Force and suggest the implementation of the following practices: 1) Include police coverage at special events and holidays in the annual operating budget 2) Set up a single capital budget for all town departments 3) Re-evaluate annually the allocated constable time spent on the four programs, depending on their relative value to the citizens 4) Consider replacing the three police cruisers over a longer period of time instead of changing them all in 1998 5) Annually review program objectives and targets and compare them based on CRP and CMPC statistics 6) Establish an incentives program to motivate police officers to achieve targets 7) Analyze all considerable operating and capital budget variances to ensure that actual numbers are in line with the expected
APPENDIX 1- CRP evaluation | 1998 Budget | 1999 Budget | 2000 Budget | Flat Rate | $325,000 | $331,500 | $338,130 | Per Capita Rate | 55,090 | 56,754 | 58,468 | Special Events | 12,000 | 12,000 | 12,000 | Total | $392,090 | $400,254 | $408,598 | Assumptions: 1.
Flat fee and per capita fee growth rate at 2% 2. Population growth at 1% 3. 300 hours of overtime for special events 4. No growth/inflation on the overtime charge of $40 5. Leasing expenses ($1,200/month for 3 years) considered as sunk costs and hence irrelevant
APPENDIX 2 – Selected Comparative Police Statistics - 1997 Program | Target | AMOS | CRP | CMPC | Traffic Control | Solve 90% of traffic offenses | 94 | 86.3 | 90.7 | | Respond within 5 minutes | 4 | 5.4 | 8.5 | Non-Traffic Control | Solve 80% of criminal and non-criminal offenses | 82 | 75.6 | 79.3 | | Respond within 5 minutes | 4.2 | 5.2 | 10.6 | Safety and Prevention | Less than 2accident fatalities per 1000 population covered | 2.2 | 3 | 1.8 | | Less than 30% repeat offenses by known offenders | 35.8 | 31.41 | 29.6 | | Inspection of 80% of commercial and public properties | 71.5 | 45.1 | 82.2 | Training and Administration | At least 20 days of training | 18 | 24 | 19
| | Reports filed within 24 hours | 22 | 21 | 30 |

APPENDIX 3- Amos Police Force : analysis of 1997 actual versus budget

Notes 1. Overtime of 300 hours at $30/hr was not budgeted but is included in the actual figures 2. Overtime was calculated by taking the program’s time proportion to the total times 300 hours at $30 (for example: (150hrs/300hrs)*(300hrs*$30/hr)=$4,500)

APPENDIX 4 – Cost of alternatives * Cost of CRP Proposal (leasing expense excluded)
1998 fee: $325,000 + ($10*5,509) $380,090
Special events fee (assume 300 hrs*$40) 12,000
Budgeted town appropriations for 1998: $392,090
1999 fee: ($325,000*1.02) + (($10*1.02)*(5,509*1.01)) $388,254
Special events fee (assume 300 hrs*$40) 12,000
Budgeted town appropriations for 1999: $400,254
2000 fee: ($331,500*1.02) + (($10.20*1.02)*(5,564*1.01)) $396,597
Special events fee (assume 300 hrs*$40) 12,000
Budgeted town appropriations for 2000: $408,597

* Cost of Keeping Amos Police Force (excluding capital expenditures)
1998 budgeted expenditures (given): $457,823
+ Special events fee (assume 300 hrs*$31.50) 9,450
- Govt. grants & miscellaneous receipts (given): (144,877)
Budgeted town appropriations for 1998: $322,396
1999 fee: ($325,000*1.02) + (($10*1.02)*(5,509*1.01)) $471,558
+ Special events fee (assume 300 hrs*$31.50) 9,450
- Govt. grants & misc. receipts (assume 144,877*1.03): (149,223)
Budgeted town appropriations for 1999: $331,785
2000 fee: ($331,500*1.02) + (($10.20*1.02)*(5,564*1.01)) $485,705
+ Special events fee (assume 300 hrs*$31.50) 9,450
- Govt. grants & misc. receipts (assume 149,223*1.03): (153,700)
Budgeted town appropriations for 2000: $341,455