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HomeMy WebLinkAboutAudit Agenda - 2017-09-25Office of the City Clerk Kitchener City Hall 200 King St.W. - 2nd Floor Kitchener ON N2G 4G7 Audit Committee Agenda Monday, September 25, 2017 3:30 - 4:30 p.m. Council Chamber Page 1 Chair — Mayor B. Vrbanovic Delegations Pursuant to Council's Procedural By-law, delegations are permitted to address the Committee for a maximum of 5 minutes. • None. Status Reports 1. FCS -17-010-3 rd Quarter Audit Status Report (30 min) 2. FCS -17-012 -Service Review Priorities (20 min) Dianna Saunderson Committee Administrator ** Accessible formats and communication supports are available upon request. If you require assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1866-969-9994 ** Staff Report rR finance and Corporate Services Department www.kitchener.ca REPORT TO: Audit Committee DATE OF MEETING: September 25, 2017 SUBMITTED BY: Corina Tasker, Internal Auditor, 519-741-2200 ext. 7361 PREPARED BY: Corina Tasker, Internal Auditor, 519-741-2200 ext. 7361 WARD(S) INVOLVED: All DATE OF REPORT: September 18, 2017 REPORT NO.: FCS -17-010 SUBJECT: 3rd Quarter Audit Status Report RECOMMENDATION: No recommendation required. The following information is being provided as an update and assurance on internal audit matters, in accordance with the Audit Committee Terms of Reference. BACKGROUND: The following report provides a summary of the Internal Audit activities completed during the period of July 2017 to September 2017. The chart below shows the audits contained in this report. Revenue division Comprehensive audit The following items are currently in progress and will be brought forward at a future audit committee meeting: • By-law Enforcement — Property Standards, process / capacity review • Fire Administration, process / capacity review • Winter Maintenance, comprehensive audit *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 1-1 REPORT: Revenue Division — Comprehensive Audit Complete: September 8, 2017 Background Information: Context In April 2016 SAP Customer Relationship and Billing (CR&B) was launched to handle tax and utility billings, replacing the CIS system. Revenue division staff experienced a high degree of stress and additional workload leading up to, during, and following the system installation. This audit was started in September of 2016 amidst a large amount of change for the staff involved. The timing presented an opportunity to review the division with an eye for changes that needed to be made in processes and structure to support the new system. Objective The goal of this review was to examine how the Revenue division performs its functions, both in terms of the processes themselves as well as the supporting structure, and determine if there are improvements which could be made to make the most of their strengths and mitigate their weaknesses. The primary focus was on organizational structure, roles and responsibilities and workload. Methodology The following activities were performed as part of this review: • Literature review of relevant internal and external documents including 2016 Employee Culture Survey results and action plans, and stakeholder input gathered for the FCS Service Strategy, among other documents • Consultation with staff and internal stakeholders • Risk assessment • Benchmarking related to organizational structure and processing volumes • Organizational structure review with a specific focus on- o streams of work, roles and responsibilities o management structure and balance between supervisors • Workload / capacity assessment with a focus on- o SAP workflow and balance between roles related to the recent SAP system implementation o Identifying temporary and long-term solutions to address workload imbalances • Consultant -led Lean review including: o Current state value stream mapping to identify sources of waste, problem statements and root causes o Future state value stream mapping to identify and quantify potential solutions o Implementation planning 1-2 o Kaizen event to implement four of the identified solutions • Assessment of alignment with FCS Service Strategy This project excluded: • Financial analysis • Controls testing Findings: Employee Input Overall the team feels their greatest strengths are their team work and willingness to help each out coupled with a desire and dedication to providing excellent customer service. They are a team of dedicated, hardworking, and knowledgeable staff. Several areas for improvement were identified by staff, many of which related to the new SAP tax and utility billing system. They voiced stress and frustration with the many unresolved defects in the new system and a need for more training and communication about the new system. Workload had increased for most staff due to tasks being more complex in SAP and spanning several roles instead of residing with one person. Most staff felt that things will improve over time as they become more familiar with the system and defects are fixed. Staff input also identified several possible improvements to the organizational structure to better group like roles, provide back-up capabilities, and increase capacity in specific areas. Stakeholder Input 42 internal stakeholders including management, front line staff and Council, were interviewed to gain their perspectives on strengths and areas for improvement. Stakeholders concurred that the Revenue team excels in their knowledge and expertise, problem -solving and accuracy. Although there were some examples of strong working relationships, generally stakeholders felt Revenue could improve their internal partnerships. It was felt by many that the division needs to devote more effort towards being a bigger part of the corporate team and being more flexible in their approach. Stakeholders were also asked about specific processes where they interact with Revenue. There were several specific suggestions for improvement which were later incorporated into the process review analysis. Risk Assessment Following the stakeholder consultation all risks were consolidated into a risk register. Revenue management met to assess the likelihood and impact of each of 54 risks using the corporate risk scale. 1-3 The top risks related to: • Risk of knowledge loss, as several employees will be eligible for retirement in the coming years • Lack of back-ups or documented procedures for several one -of roles • Processes and organizational structure may not support the new SAP system and need to be reviewed • Some resistance to change within the division Lean Process Review The goal of this phase of the review was to employ Lean management techniques in order to optimize current resources to address workload and workflow imbalances. An external consultant with skills in Lean management facilitated this work. The objectives included identification and implementation of tangible process improvements in order to decrease non -value added time, decrease customer wait times and improve accuracy rates. The outcomes of this part of the review were then used to help determine capacity, and as input into the organizational structure analysis. This Lean review included all three revenue streams: property taxes, utilities, and miscellaneous billings. The processes were separated into five macro steps: customer set-up, billing, payments, collections and deposit of funds. This phase of the review followed typical Lean management review steps including: • Pre -work and Planning • Data Collection • Current State Value Stream Mapping • Future State Value Stream Mapping • Kaizen Events • Debrief During the current state value stream mapping workshop, staff were asked to classify each process step as either value -add, non -value -add or necessary -non -value -add based on these definitions: • Value -add = work that your customer requires you to perform; the customer must be willing to pay for it (or it adds value to them) AND the activity transforms the product or service in some way AND the process is done right the first time (i.e., no rework) • Non -value -add = customers don't want it and we don't want to be doing it (i.e., waste) • Necessary -non -value -add = non -value -add but it must be done in today's environment in order to best serve the customer (e.g., legislated requirements) The effort required to perform each process was also captured. Any process steps identified as non -value -add were further analyzed to define the problem and analyze the root cause. 14 problem statements were identified. FSI All of the problem statements further analyzed to brainstorm possible solutions and improvements. All potential solutions were then prioritized based on ease of implementation and total impact (qualitative and quantitative). Those with high impact were identified for implementation. Total estimated time savings if all high impact solutions were implemented equated to 366 days savings or approximately 1.5 FTE worth of additional capacity spread across several roles. These included actions such as improving property data set-up accuracy, decreasing customer wait time related to the top three categories of long duration calls, and reducing investigation time on billing anomalies, to name a few. Four of the problem statements and associated actions were chosen to be implemented immediately during a 3 -day Kaizen event, which was facilitated by the consultant. Kaizen means "change for the better" and is simply dedicated time to implement improvements. Management is responsible for taking the lead on facilitating additional Kaizen events to ensure the remaining actions are implemented in a timely fashion, as per the agreed upon implementation plan. The following four objectives were chosen for the Kaizen event: 1. Reduce customer wait time for pre -authorized payment calls to CSR's 2. Improve pre -authorized payment data accuracy 3. Improve data accuracy from banks for mortgages 4. Improve consistency and productivity in billing adjustments Although not all actions were completed during the Kaizen event, the following achievements were realized by the team: Pre -Authorized Payments • Standardized business rule regarding processing times and process steps • Documented decision trees and frequently asked questions based on the business rule for CSR's so that calls about pre -authorized payments can be answered quickly and without needing to transfer to other staff • Redrafted forms and return envelopes to eliminate free form account number field and require a void cheque or bank form in order to avoid inaccurate or missing customer account number information Banking • Documented required format / information for banks with mortgage / pre - authorized tax to ensure data is sent to staff in the correct format • Documented improved standard process flow for mortgage / pre -authorized tax payments Bill Re -calculations for Utilities • Detailed review and documentation of process which will assist in cross -training to mitigate the risk of this one -of role 1-5 Staff have created a 10-30-60-90 day implementation plan to complete the remaining actions for all four Kaizens. Organizational Structure One of the deliverables in this review was to analyze the current organizational structure and capacity in light of the new SAP system implementation and other factors, to determine if changes are required. Various pieces of information were gathered on this subject including a capacity analysis, staff and stakeholder input, benchmarking with 6 other cities of similar size and / or responsibility for utility billings, and historical organizational structures in this division. The project team then facilitated a workshop with Revenue management and then the DCAO, FCS to review the data, explore alternatives, and make a decision on the organizational structure going forward. A number of key issues and opportunities related to the current organizational structure were itemized and explored. Issues or pressures on the structure include: • Population growth driving demand for service • Current call wait times exceed customer service industry benchmarks (*note that benchmarks include all industries and not just municipalities) • Workload is not spread evenly amongst staff • `One -of' roles are difficult to backfill and a challenge when there is turnover • In some functions, supervisors are performing front line work that would better fit with staff, however there is no capacity to delegate these tasks to staff Opportunities that were identified and considered include: • Create or recombine functions for better oversight and service continuity • Delegate more tasks from supervisor to staff • Combine and cross train some roles • Create or combine sections/roles for greater oversight and service continuity The preferred organizational structure will be rolled out to staff later this year. This new structure will provide a more logical grouping of like roles, a better distribution of tasks, and mitigation of one -of roles. The new structure will not change the core complement. Recommendations: A total of 13 recommendations were developed in this review. One of the recommendations focuses on implementing the Lean action plan which includes an additional 23 activities related to process improvements including understanding and documenting processes to ensure efficiency. A few of the recommendations relate to creating a focus on the FCS department mandate, vision and focus areas, with an emphasis on partnering with other divisions to resolve specific process related issues and collaborate to develop solutions. Other recommendations refer to ensuring accountability and communication around implementing the process improvements identified in the Lean review, as well as recognition for staff who embrace the continuous improvement mindset and culture. 1-6 Conclusion: This review looked critically at a variety of Revenue processes, and the resulting recommendations are focused on enhancing effectiveness and efficiency, reducing waste and increasing capacity. The Lean action plan strives to add more value from the customer's perspective while eliminating non -value added tasks. The organizational structure changes will better align roles and responsibilities and allow for more effective coverage of absences. Overall the changes will position the division to meet future challenges such as population growth and new service trends such as e -services. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: This report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: There are no financial implications related to this report. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. 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CO 1-29 4-j V a --j (A M-1 L C6 E t V QJ -C-+ X O tvD C: O }, 4-j � ca O ca 0- U Om 0 O 0 a--+ c O y- bn .E O ai0- O m 0 O cn N ca L O E w Li' u 1-31 1-32 c O 4-Jco • - m (I) 4-J L +-j +-J N L > O CSA ._ +-+ V Q O cn m O O V � O � _ `'— O O C- O 4-j +- ca E +-j __ . _r*44 -�-' CL W aA V O bz M L_ - O V � V V ._ •_ N Ovi 4-J _0 ?�. 0 � _ O Q z2 2 um o 1-32 M V E O E .p O .N > C: m N _ m C:•O -0 cn � v O ca • C: O +� E qj (L)+ -J ,N E > c E O Ov C- c6 " m � s CL auo CL m CL � E C: c � (3)V O � N m 0- 4-j _4-, Lna--+ V U'• — V E L.L C: cn ate-+ ct3 O —I v) p OU a -J V m :cn 4-J O cn ULn 0 � � E ;—, CU CU p > m D L- � cin C) -V C ate- J Q� I ca U I ca O w I oC I V E O E f't• cry O N u Staff Report rR finance and Corporate Services Department www.kitchener.ca REPORT TO: Audit Committee DATE OF MEETING: September 25, 2017 SUBMITTED BY: Corina Tasker, Internal Auditor, 519-741-2200 ext. 7361 PREPARED BY: Corina Tasker, Internal Auditor, 519-741-2200 ext. 7361 WARD(S) INVOLVED: All DATE OF REPORT: September 11, 2017 REPORT NO.: FCS -17- 012 SUBJECT: Service Review Priorities RECOMMENDATION: No recommendation required. The following information is being provided as an update and assurance on internal audit matters, in accordance with the Audit Committee Terms of Reference. BACKGROUND: In 2012 Audit Committee approved a risk based framework to prioritize services across the corporation for the purposes of performing service reviews. All 95 services were ranked based on three factors: 1. Total risk score (60% weighting) 2. Operating expense budget (30% weighting) 3. Date of last review (10% weighting) This framework allowed focus to be placed on reviewing the higher risk services first, while adjusting the ranking for services which had recently been reviewed or did not generate high operating expenses. The annual integrated service review work plan is then constructed each year by choosing the next services on the prioritized list. The list was refreshed in 2016 based on updated risk, budget and review data. Audit Committee members are asked to provide their input regarding the prioritized list and bring forward any areas for review they would like considered in the work plan for 2018. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 2-1 REPORT: 2017 Carry Over The following service reviews will not be complete by the end of 2017 and will thus carry over into 2018 and impact available staff capacity: SAP — separation of duties Engineering — Consultants Kitchener Utilities — risk assessment and subsequent process reviews Prioritized Service Review List Attached in Appendix A is the list that was generated in 2016 of the service reviews in priority order. The items at the top of the list are likely the next candidates for service reviews in 2018, subject to input from staff and Council. Council is asked to consider whether there are any service reviews or internal audits that they would like to see take priority as the 2018 internal audit and service review work plans are being drafted. The work plans will be brought back to Audit Committee for final comment and approval on December 11, 2017. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: This report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: There are no financial implications related to this report. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. 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