SPEAKING NOTES

ERIK PETERSON

VICE PRESIDENT,

CORPORATE SERVICES &

CHIEF FINANCIAL OFFICER

BRITISH COLUMBIA SAFETY AUTHORITY

__________________________________

ANNUAL PUBLIC MEETING

WEDNESDAY, JUNE 13, 2012

LANGLEY, BC

2

Title Slide

Erik Peterson Vice President, Corporate Services

and Chief Financial Officer

Thank you Catherine.

I am very pleased to review for you the financial state

of the BC Safety Authority as it looked at the end of

last year. Our Annual Report provides a very

comprehensive view of our revenues and

expenditures for 2011. Specifically, starting on page

40 you will find our Management’s Discussion and

Analysis, which is followed by our audited financial

statements.

3

As Peter noted, BCSA is a self-funded organization.

We generate revenues ONLY from fees charged for

installation and operating permits, licensing,

certification, equipment approval and design

registration.

When economic times are bad, our revenues take a

hit - just as yours do. But even in the context of this

difficult environment we are still mandated to be

financially sustainable while providing comprehensive

safety services.

4

Slide

As we entered 2011, it became clear that the

economic troubles that began in 2008 would not soon

turn around. A continued downward trend in housing

starts and broader economic conditions during much

of last year impacted revenue. In particular, we saw a

significant drop in residential installation permit

volumes in both electrical and gas technologies.

Consequently revenues for most months in 2011 were

lower than expected, and the lowest since 2008.

5

Slide

2011 Financial Summary

You can see how this played out geographically. The

dark blue bars in this graph represents 2010, the light

blue 2011. Over the course of the year, we saw an

overall decrease in revenues in the Georgia Strait,

Lower Mainland South and northern Vancouver Island

regions, very small increases in the interior and a

slightly larger increase in Lower Mainland North.

Now let’s take a look at our 2011 revenue and

expenditure figures. For simplicity I have rounded

them off.

6

Slide

2011: Deficiency of Revenue Over Expenditures $ (998,000)

Revenue Over Expenses

2011: Revenue $ 39,353,000

2011: Operating Expenses $ (40,351,000)

2011 Financial Summary

Revenues continued the downward trend of last year

and totalled $39.35 million, a decrease of $465,000

over the previous year. Expenses remained about

the same as 2010 at $40.3 million, the result of mid-

year cost controls and spending curtailment.

And so, as anticipated at the start of the year, we

recorded a net loss of just over $998,000. The good

news, if you can call it that, this was just slightly

worse, by only a few hundred dollars than we had

projected.

7

Although no organization can ever be satisfied by a

net loss, in this case it was anticipated as we were

following the economic downturn. We have been able

to finance deficits like this through our operating

reserves, through continued belt-tightening and by

finding ways to gain efficiencies. This has allowed us

to maintain our high standard of safety services while

at the same time keeping fees frozen for four years in

a row.

Let me add one point about the expense side of the

ledger, where we have been very disciplined.

8

Slide

As I have already indicated, total expenses in 2011

were $40.35 million. That represented an increase of

only $28,000 over 2010, 3.0% below our budget

forecast.

Slide

9

Salaries and Benefits account for the largest slice of

the expenditure pie. Although the overall

expenditures were up due to negotiated and general

wage increases, total compensation costs came in

under budget by $1 million as a result in delays in

hiring as well as a 50% curtailment in incentives for

management level positions. For 2012, we budgeted

zero increases in headcount.

Among other costs savings last year were a reduction

General Operating and Administrative costs of 4.5%.

However, despite cost reductions, we still came up

with a substantial overall deficit. We have pushed

ourselves just about to the limit in finding ways to

reduce spending and redeploying our staff and

eliminating positions where possible. So we have

finally decided we must increase fees.

10

Slide

We have maintained a fee freeze for the past four

years in support of our clients during the economic

downturn. In order to effectively continue providing

professional regulatory oversight and a high level of

client service, we now need to increase our fees.

They support the long list of services that Brian will be

detailing in his talk.

For our four larger technologies, we conducted a

preliminary consultation with our top clients and key

industry associations on an initial proposal of a 5%

maximum increase in 2012, and a 3% maximum

increase in the following two years.

11

The feedback signalled that a 5% increase would

negatively impact client business in a competitive

market.

We listened. We weighed the options. And we

reduced the proposed increases to a weighted

average of 3% in each year from 2012 through

2014 even though this means we will continue to have

to carry a deficit in 2012. The proposed fee

schedules for each impacted technology are available

at all BC Safety Authority offices and on our website.

Fee increases will take effect in late August 2012.

Later in the year we will also be consulting on the

simplification of our fee structures – something we’ve

clearly heard a need for.

In addition, you should know that some of our fees will

be reduced as of 2013.

12

Slide

Looking Ahead

Looking ahead, we expect a very modest recovery.

But assumptions in this regard are always a tricky

business. We have accepted guidance from

economists who anticipate that the BC economy will

grow by 2.3% in 2012. The construction industry is

expected to be the fastest growing sector - led by

increases in commercial, industrial and building

construction. Residential construction is expected to

grow but at a slower pace with a stronger focus on

new construction.

13

Slide

For our part we will make every effort to deliver

necessary safety programs as efficiently and cost

effectively as possible. 2012 is a year of development

and improvement, where we have, among other

things, budgeted $5.3 million for the second phase of

the project to replace our computer system to allow

our clients to do their business with us quickly and

conveniently online. We are also taking advantage of

the economic slowdown to redesign how we do things

- and further invest in prevention initiatives.

14

So with that, I am going to conclude. Thank you for

your patience in allowing me to throw a lot of numbers

at you. But I hope you have a clearer picture of

Safety Authority Finances.

It is my pleasure to now give the podium to Brian

Rowland to report on the many programs and safety

services that benefit public safety and our client

groups.

Thank you.

Brian Rowland Vice President, Operations and Service Excellence