HomeMy WebLinkAboutFIN-08-045 - Capital Asset Accounting ImplementationILREPORT
Report To: Councillor Berry Vrbanovic, Chair, and Members of the
Finance and Corporate Services Committee
Date of Meeting: March 31, 2008
Submitted By: Joint Steering Committee, Project Delta
Prepared By: Dan Chapman, General Manager of Financial Services
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Date of Report: March 26, 2008
Report No.: FIN-08-045
Subject: Capital Asset Accounting Implementation
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THAT the consultant selection requirements of the City's purchasing by-law be waived and staff
be directed to retain the firm of Prior & Prior Associates Limited to coordinate the City's capital
asset inventory data collection and valuation activities in support of the implementation of PSAB
3150 — Tangible Capital Assets to an upset limit of $110,000; and further
THAT staff be directed to not prepare May interim financial statements in order to create
capacity for Financial Planning & Reporting Staff to support inventory collection and valuation
activities as well as report creation for the Delta Project.
In June 2006, the Public Sector Accounting Board (PSAB) approved accounting standard PSAB
3150 — Tangible Capital Assets. Effective for fiscal years ending in 2009, this standard requires
all municipalities to report capital assets on their financial statements similar to organizations in
the private sector. As part of the 2007 budget process, Council approved a business case for
PSAB 3150 implementation and provided funding for the initiative.
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• The City retained a PSAB 3150 Project Manager on contract to lead the implementation
of the standard;
• A Capital Asset Management Business Process Study was completed to review the
City's capital asset management practices and develop and document the business
processes to support the needs for both asset management and asset accounting at the
City of Kitchener;
• Requirements for the new financial system were clearly defined, resulting in the
selection of SAP-Cityworks-RIVA as a solution capable of meeting the City's asset
accounting and reporting requirements;
• City staff were oriented on the requirements of the new standard; and
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The City will commence the configuration and "realization" of the new systems on April 1 and is
targeting end of September as the date by which data must be converted for the new systems to
go live by the end of 2008. The Delta Project has reached a significant milestone.
On March 12, 2008 the PSAB 3150 Project Manager left the City. In the absence of allocating
other resources to this initiative, the capital asset accounting project will be delayed and impact
the City's ability to comply with accounting regulations and Delta project requirements.
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Subsequent to the departure of the PSAB 3150 Project Manager on March 12, 2008 the Delta
Project Joint Steering Committee endorsed the creation of an Asset Accounting Work Group
(AAWG) to coordinate the next phase of the asset accounting implementation.
The AAWG reviewed potential resourcing options, including retaining a new project manager or
seeking a firm to provide the required support to the City. After considering the options, the
AAWG and Delta Project Joint Steering Committee recommend that Prior & Prior Associates
Limited be retained to coordinate the City's capital asset inventory data collection and valuation
activities. This recommendation is advanced for the following reasons:
• Experience - Prior & Prior completed the Capital Asset Management Business Process
Study for the City in 2007, gaining knowledge of City processes and meeting with City
staff members. This experience would bring efficiency to the next phase of work.
• Timing - As discussed above, a delay in replacing the PSAB 3150 Project Manager
would impact the City's ability to comply with legislated deadlines - specifically, the need
to report on 2009 asset transactions under the new accounting standard. Prior & Prior
is available immediately and will mobilize a team to accelerate the project.
• Skills - Prior & Prior's skill set is a match for the City's requirements. Specifically the
firm has worked closely in the past with LOKI, the provider of the City's asset
management/accounting tool and also have extensive knowledge of GIS/database
structures. In addition, they have completed and are supporting other PSAB 3150
implementations.
• Risk Management - KPMG has been retained as Risk Advisor on the Delta project.
Staff consulted with KPMG with respect to risk mitigation and KPMG has indicated that
responding quickly to fill the vacancy is important to avoid lost time on the critical path.
In addition, retaining an experienced firm is desirable given the thin job pool and the fact
that provides access to multiple disciplines. Finally, retaining a firm under contract with
clear deliverables will reduce the risk of loss of key resources for the duration of the
project.
• Pricing - Staff is satisfied that Prior & Prior's pricing is competitive, as their proposed
hourly rates are, on average, lower than the rates paid for the Capital Asset
Management Business Process Study. When the City went through the competitive
process to award the initial contract, staff found that their hourly rates were between
26% and 94% lower than the rates quoted by the other respondents.
Notwithstanding that Prior & Prior would coordinate the remaining phase of the City's PSAB
3150 implementation, staff across the organization will be involved in manual and electronic
data collection, policy development and valuation activities. Oversight will be provided through
the AAWG as well as the Delta Project Joint Steering Committee and Task Force.
Financial Planning & Reporting Staff have traditionally prepared an interim financial report for
Council as of the end of May. Due to the timing of the summer recess, this is not presented to
Committee until August. Staff recommends that the May interim report not be prepared for the
following reasons in 2008:
• Reallocating the time spent on interim report preparation will enable Senior Financial
Analysts to support asset inventory collection and valuation activities;
• Financial Planning & Reporting Staff have assumed responsibility to assist in the
creation of 51 new electronic reports, representing 153 development days between now
and September, for the Delta Project; and
• The recent transition of the GM of Financial Services to a new role with the associated
back filling of that position has created a vacancy within the Financial Planning and
Reporting Division, resulting in additional workload issues during the year-end audit
process.
The most significant potential budget variance that would generally arise between January and
May relates to Winter Control. On March 17, Council requested staff to report back on May 5
with an update on winter control and pothole costs, with a discussion on budget variance
mitigation. This reduces the need for the May interim report.
FINANCIAL IMPLICATIONS:
It is estimated that it will cost $75,000 to $100,000 for Prior & Prior to coordinate the remaining
capital asset inventory collection and valuation activities. Approximately $110,000 remains in
the original budget for the PSAB 3150 Project Manager, which will be used to fund this contract.
Dan Chapman, CA MPA
General Manager of Financial Services