HomeMy WebLinkAboutFinance Committee Agenda - February 26, 20151
This Finance Committee is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance
Committee’s agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to
comment on agenda items before the Finance Committee and items not on the agenda but are within the subject matter jurisdiction of
the Finance Committee. The Finance Committee may limit public comments to a reasonable amount of time, generally three (3)
minutes per person.
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CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA
COUNCIL CHAMBERS - 100 CIVIC CENTER DRIVE, NEWPORT BEACH
FEBRUARY 26, 2015, 6:00 P.M.
FINANCE COMMITTEE MEMBERS: STAFF MEMBERS:
Keith Curry, Chair / Council Member
Diane Dixon, Mayor Pro Tem
Tony Petros, Council Member
Bill McCullough, Committee Member
Larry Tucker, Committee Member
John Warner, Committee Member
Jack Wu, Committee Member
Dave Kiff, City Manager
Dan Matusiewicz, Finance Director / Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
____________________________________________________
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be within the
subject matter jurisdiction of the Finance Committee. Speakers must limit comments to three (3)
minutes. Before speaking, we invite, but do not require, you to state your name for the record. The
Finance Committee has the discretion to extend or shorten the speakers’ time limit on agenda or
non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a
courtesy, please turn cell phones off or set them in the silent mode.
IV. APPROVAL OF MINUTES
Summary:
Approval of the November 17, 2014, Finance Committee Minutes.
Recommended Action:
Receive and file.
V.CURRENT BUSINESS
A.FISCAL YEAR 2013-14 AUDIT RESULTS
Summary:
In connection with the City’s financial statement audit and the Single Audit for federally assisted
grant programs, the auditors have certain obligations to communicate the audit results with both
City Council and management.
Recommended Action:
Receive and file.
Finance Committee Meeting Agenda
February 26, 2015
Page 2
B. ERP UPDATE
Summary:
ERP (Enterprise Resource Planning) software is a business management software system that
integrates all of the City’s core functional requirements for financials, human capital
management, citizen services, and revenues. The ERP implementation is scheduled to take
between 25 and 30 months and will consist of five major phases. The City is currently in Phase 1
(Financials) and began the implementation of Phase 2 (HR/Payroll) in January 2015. The
software provider of the City’s ERP is Tyler Technologies Inc. and this project is titled “eSAIL,”
short for ERP System Administration and Implementation Lineup.
Recommended Action:
Receive and file.
C. FINANCE COMMITTEE 2015 WORK PLAN
Summary:
Staff will present and seek approval of the tentative Finance Committee agenda topics
scheduled for the year. The work plan represents the planned topics of discussion; however, is
subject to change based on the availability of information and the need to schedule other topics
as they arise.
Recommended Action:
Receive and file.
VI. ADJOURNMENT
Page 1 of 7
CITY OF NEWPORT BEACH
CITY COUNCIL FINANCE COMMITTEE NOVEMBER 17, 2014 MEETING MINUTES 1) CALL MEETING TO ORDER
The meeting was called to order at 3:03 p.m. in the Newport Coast Conference Room, Bay 2E,
100 Civic Center Drive, Newport Beach, California 92660.
2) ROLL CALL
Present: Council Member Mike Henn (Chair), Council Member Keith Curry (arrived at 3:16 p.m.)
and Council Member Tony Petros
Staff present: City Manager, Dave Kiff; Deputy City Manager/Human Resources Director, Terri
Cassidy (arrived at 3:38 p.m.); Finance Director, Dan Matusiewicz; Deputy Finance Director,
Steve Montano; Budget Manager, Susan Giangrande; Assistant City Engineer, Mike Sinacori; Sr.
Budget Analyst, Shannon Espinoza; Public Works Deputy Director, Mike Vukojevic; Fire Captain,
Mike Mullen; Revenue Manager, Evelyn Tseng; Accounting Manager, Rukshana Virany; Acting
Municipal Operations Department Co-Director, George Murdoch; Public Works Director, Dave
Webb; and Administrative Specialist to the Finance Director, Marlene Burns
Members of the public: Jim Mosher, Carl Cassidy, and Council Member-Elect Scott Peotter
Outside entities: Sima Mostafaei from HF&H Consultants, LLC and Megan Nicolai from Orange
County Register
3) PUBLIC COMMENTS
Jim Mosher thanked the Committee for recognizing the importance of public comment and commented on the Finance Committee's work plan. He noted that a quarterly report has not
been issued for a while and suggested preparing a template and inserting updated numbers so that reports can be issued on a more-timely basis. Additionally, he commented on a secondary
review of the City's discretionary reserve policy and noted it is not on today's agenda.
Chair Henn reported that there is a full agenda and that the committee and staff had to choose what items to include and not include on this agenda.
Finance Director Dan Matusiewicz provided a status update of the Quarter Business Report and
noting that staff has looked at an alternative form of delivery and determined to report on items as they come up instead of waiting until the end of a quarter.
4) APPROVAL OF MINUTES
Approval of the July 21, 2014, Finance Committee meeting minutes.
Chair Henn noted that he did not attend the Finance Committee meeting of July 21, 2014, and
would abstain from the approval of the minutes.
Chair Henn opened public comments.
Jim Mosher made suggestions for corrections to the minutes.
Chair Henn closed public comments.
Page 2 of 7
Council Member Petros moved, and Council Member Curry seconded the approval of the July 21,
2014, Finance Committee meeting minutes. The Committee voted 2 ayes and 1 abstention (Chair
Henn) to approve the minutes, as corrected by Mr. Jim Mosher.
5) CURRENT BUSINESS
A. Wastewater Rate Study Results: The Municipal Operations Department retained the consulting
services of HF&H to prepare a wastewater and recycled water rate study. The purpose of this presentation is to review the results of the wastewater rate portion of the study and propose the
adoption of an appropriate wastewater rate.
Acting Municipal Operations Department Co-Director Murdoch presented information regarding the make-up of the waste water enterprise fund and the items paid for by the fee. He provided
details of the rates charged and noted that the proposed rate structure would eliminate surcharges and per-dwelling unit charges and would use only the fixed-meter charge and a
commodity rate. He addressed current charges, effects on residents, balancing the budget, and meeting the City's reserve policy to fund Capital projects. He referenced the updated Wastewater
Master Plan and further addressed actions needed to meet the City's reserve policy and fund Capital projects and operations.
Council Member Petros commented on the City's reserve policy and what it is intended to do. He
added that the intent of the reserve is to provide funds to offset cost increases that are projected to be short-lived therefore, partially eliminating the volatility of partial rate adjustments. It is not
intended to offset long-term pricing structure changes.
Chair Henn reported that the current rate structure does not allow for ongoing funding of Capital Improvement Projects in accordance with the Master Plan. He added that there is a need to
increase rates in order to provide for the ongoing needs in CIPs. He continued noting that next year, rates will need to be increased in order to back fill the reserves to the policy level. Reserves
are intended to cushion rate impacts from sudden, unplanned events.
In response to Council Member Petros, Acting Municipal Operations Department Co-Director Murdoch reported that if the Sewer Master Plan is redone, there would need to be a change in
the rate structure. He added that staff continuously reviews the Master Plan and that projects are prioritized according to need.
Chair Henn noted that other than minor adjustments, there has not been a Master Plan study
since 2009. He added that the Master Plan was not executed to the level that was planned.
Chair Henn referenced Proposition 218 and added that charges in the enterprise fund must be directly related to costs incurred.
Acting Municipal Operations Department Co-Director Murdoch addressed actions necessary in order to adjust rates under Proposition 218.
City Manager Kiff commented on a subsidy of multi-family commercial that single-families are paying for and requested clarification of the matter.
Discussion followed regarding justified and unjustified charges. Sima Mostafaei, HF&H, explained that all the costs have been identified as a fixed cost and that
they need to be covered in order to maintain the system. Commodity charges would be the variable costs and would increase or decrease based on the flow. She added that the surcharges
would be considered more of a fixed cost as the size of the meter could be aligned with the type
of customer. She explained the process and calculation used for developing the rate structure.
Page 3 of 7
Chair Henn stressed that the approach for developing commercial rates is analogous to the approach used for potable water.
Sima Mostafaei, HF&H, added that the larger the meters, the larger the cost borne by customers
with those meters.
Chair Henn referenced a chart in the staff report noting that it sets forth the actual dollar impacts
to customers. He added that it is a very small impact on the City's customer base.
Acting Municipal Operations Department Co-Director Murdoch referenced a comparison of neighboring agencies and noted a difference in service in that the City maintains its own sewer
lines. He addressed actions taken by the City resulting in not having to raise the rates over the last nine years and next steps.
Chair Henn indicated this is an action item which would be to make a recommendation for the full
Council.
Chair Henn opened public comments.
Jim Mosher reported that waste water from his home is handled by the Costa Mesa Sanitary District which participated in a rate study and Proposition 218 hearings. He stated that people
were not as concerned about rate increases as they were with whether they were getting an equitable distribution of costs among single- and multi-family residences and commercial users.
Chair Henn closed public comments.
Acting Municipal Operations Department Co-Director Murdoch added that staff typically looks at
the water meter and not the sewer connection size. He addressed options for adjusting rate structures. He noted that he feels comfortable with the proposed structure.
In response to Chair Henn's question regarding practices of other jurisdictions, Ms. Mostafaei
reported that the proposed schedule is in accordance with standard practices and addressed challenges in determining indoor and outdoor uses as residential customers do not have separate
meters for irrigation.
Council Member Petros moved, and Chair Henn seconded to move this item forward to Council for their consideration as proposed and discussed above. The Committee voted all ayes.
Council Member Curry noted that when it gets to Council, he reserves the right to look at the
status going forward and how schedule changes are justified. He added that in many cases, the size of meters for commercial customers is not clear. He noted the need for transparency.
B. Preliminary FY 2013-14 Year-End Update: Staff will present preliminary financial results of year ending June 30, 2014.
In response to Chair Henn's question regarding the expected completion date of the FY 2013-2014 Comprehensive Annual Financial Report, Finance Director Dan Matusiewicz reported that
the auditors are finishing up their field work this week and the final financial report is expected to be completed in mid-December.
Deputy Finance Director Steve Montano presented details of the staff report addressing reserve
and surplus levels.
Page 4 of 7
Deputy Finance Director Montano addressed revenues, a comparative income statement, higher-than-expected revenues, expenditures, net income, and General Fund reserves.
Council Member Curry noted that reserves were spent on other capital projects and stated that an
explanation is needed to track that money. He added that it was used for facilities.
Chair Henn added that an increase in the contingency reserve was also approved, the number of reserves was reduced and money was consolidated into the contingency reserve.
City Manager Kiff stated that the point is well-taken that the majority of reserve money went to
facilities.
Council Member Petros commented on the amount of money that went into the reserve from developer contributions. In response to his inquiry, Deputy Finance Director Montano reported
that most of that money was from the Newport Center project as well as other projects.
Deputy Finance Director Montano addressed the FFP (Facilities Financial Planning) reserves and noted that consistent contributions from the General Fund into the FFP will continue. He
addressed future development contributions and presented a summary of all the available and discretionary reserves and all of the resources available to the City across all funds that are not
classified as either non-spendable or restricted.
Chair Henn opened public comments.
Jim Mosher commented on available and discretionary reserves, Council commitments, and other City reserves.
Chair Henn closed public comments.
The report was received and filed.
C. Facilities Financial Planning (FFP): Staff will review the latest draft iteration of the Facilities
Financial Planning Tool for Finance Committee review and comment.
Chair Henn reported that the FFP is a financial planning tool, explained its purpose and commented positively on the tool.
Finance Director Matusiewicz provided details of the staff report addressing replacement of
facilities on an on-going basis, developer contributions and the affordability of debt service.
Discussion followed regarding development fees affecting the timing of the FFP and ensuring the City is conservative on incoming revenues.
Finance Director Matusiewicz noted this is a living document which is reviewed yearly with the
best available information. He added that the intent is to review it prior to the budget season so that informed decisions can be made regarding future programming.
Chair Henn opened public comments.
Council Member-Elect Scott Peotter commented on public benefits fees and in response to his
question, Finance Director Matusiewicz reported that the public benefit fee is unrestricted but due to Council policy, 2% of the public benefit fee is set aside for public art.
Jim Mosher suggested the FFP would be an appropriate topic for a study session for Council and
the public to understand it.
Page 5 of 7
Council Member Curry noted that it was a subject considered at the Council retreat held in January and that it was presented at a regular study session.
Chair Henn noted that Mr. Mosher's point is germane as it relates to the new Council Members.
Mr. Mosher suggested edits to the document.
Chair Henn closed public comments.
Chair Henn commented on projects that can be executed as cash expenditures and no debt.
D. CalPERS Pension Plan Update and Analysis of Payment Alternatives: Staff will review the most
significant changes since the last actuarial valuation. Staff will also review an analysis of alternative payment options to accelerate the pay-down of the City’s unfunded pension liability
and request a Finance Committee recommendation to bring forth to City Council.
Finance Director Matusiewicz reported that the City received its most recent CalPERS valuation in October for June 30, 2013, which sets the contribution rates for Fiscal Year 2015-2016.
Council Member Curry noted that the City is dealing with liabilities as they were calculated two
years ago because that is how CalPERS does it.
City Manager Kiff reported that the youngest valuation is about fifteen months and the oldest is about two years.
Finance Director Matusiewicz addressed adjustments made by CalPERS, effects on unfunded
liabilities and the City's goal to pay off its unfunded liabilities over a fixed period of time.
Finance Director Matusiewicz addressed accelerating payment options from the current option down to a ten, fifteen and twenty year plan. Instead of twenty, he analyzed a nineteen-year
option. He addressed the schedules in the staff report using the various assumptions, the CalPERS amortization process, incremental costs and savings of the various options, and cutting
payment durations.
Chair Henn suggested showing total savings.
Finance Director Matusiewicz addressed the unfunded liability balance, reductions using the various alternatives, and vulnerability to further changes in actuarial assumptions and market
value fluctuations.
Finance Director Matusiewicz recommended the nineteen-year payment alternative noting that it has the most bang for the buck.
Chair Henn agreed with the need to be judicious in how the City selects among the three different
alternatives. He noted that the City could do a new "fresh start" every year. He added that the City does not want to be in a position of selecting a mandatory solution that stands a potential for
the City to wind up overfunded in its pension plan. He suggested that this needs to be analyzed every year. He noted that the more aggressive the alternative, the less flexibility there is to
provide services, programs, capital improvements, and investments in the community going forward.
Council Member Curry added that the entire PERS system is set up for a dollar-cost-averaging
approach to funding over time. He agreed with Chair Henn regarding the need to be prudent in picking a payment, over time, that accelerates the payment, captures the present-value benefit,
and does so in a way that allows the City to continue providing the same quality level of service that it provides while taking advantage of fluctuations in the market.
Page 6 of 7
Council Member Petros reported that the compelling numbers for him were the costs-to-benefits.
He added that he is comfortable with the nineteen-year acceleration.
Chair Henn agreed that the nineteen-year plan is appropriate but noted that it can be adjusted in the future.
Chair Henn opened public comments.
Carl Cassidy opined that a number is missing as it relates to what the City earns by keeping the
money. He added that there is a value to leaving the money in the City rather than sending it to Sacramento.
Council Member Curry agreed and added that is why the City must be careful that it is not
sending too much money to CalPERS because of the possibility of cutting services.
Finance Director Matusiewicz addressed the current schedule and the proposed alternative.
Discussion followed regarding consideration of the mortality rates.
Chair Henn closed public comments.
Chair Henn addressed actions needed at this time.
City Manager Kiff noted that this will be included in Council's January agenda.
Discussion followed regarding payment options differentiating between the additional discretionary payment (ADP) recommendation and the “fresh start” alternative.
Council Member Curry moved, and Council Member Petros seconded to recommend to the City
Council at its next meeting, approval of the nineteen-year, fresh start alternative. The Committee voted all ayes.
Discussion followed regarding the timeline for moving forward on this matter
It was suggested to allow the new Council to consider and act on this matter.
Chair Henn commended staff for their hard work.
E. Enterprise Resource Planning Software Implementation (ERP) Update: Staff will provide the
Committee with a progress report on the Enterprise Resource Plan project to receive and file.
Deputy Finance Director Montano provided a brief overview of the ERP noting it is the City's new, integrated public finance and Human Resources system. He addressed implementation, noted it
is progressing as planned, and reported the "go-live" dates for the different elements.
Chair Henn commented positively on the system.
Finance Director Matusiewicz commended Budget Manager Susan Giangrande for her work on this project.
6) FINANCE COMMITTEE ANNOUNCEMENTS OR MATTERS WHICH MEMBERS WOULD LIKE
PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-
DISCUSSION ITEM)
Page 7 of 7
No other items were discussed.
Council Member Curry commended Chair Henn for his contributions to the Finance Committee
and the City.
7) ADJOURNMENT
The Finance Committee adjourned at 5:21 p.m.
.
The agenda for the Regular Meeting was posted on November 14, 2014, at 9:32 a.m., in the binder and
on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center
Drive.
Attest:
___________________________________ _____________________ Keith Curry, Chair Date
Finance Committee Chair
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5A
February 26, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
(949) 644-3123, DanM@newportbeachca.gov
SUBJECT: Fiscal Year 2013-14 Audit Results
SUMMARY:
In connection with the City’s financial statement audit and the Single Audit for federally
assisted grant programs, the auditors have certain obligations to communicate the audit
results with both City Council and management. The attached letters from the City’s
auditors, White Nelson Diehl Evans fulfill those obligations for the required
communication.
RECOMMENDED ACTION:
Receive and file.
DISCUSSION:
The first audit letter is intended to communicate matters of particular significance that
City Council should be aware of including:
Qualitative Aspects of Accounting Practices
Difficulties Encountered in Performing the Audit
Corrected and Uncorrected Adjustments
Disagreements with Management
Management Representations
Management Consultations with Other Independent Accountants
Other Audit Findings or Issues
We are pleased to report that the auditors reported no instances of significant audit
findings; difficulties encountered in connection with the performance of the audit;
Fiscal Year 2013-14 Audit Results
February 26, 2015
Page 2
corrected or uncorrected adjustments; disagreements with management or other audit
findings or issues.
The second letter entitled “Independent Auditors’ report on Internal Control over
Financial Reporting and on Compliance and Other Matters” is intended to communicate
deficiencies, significant deficiencies or material weaknesses in internal control and
instances of noncompliance or other matters. We are pleased to report that the auditors
did not identify any deficiencies in internal control considered to be a material weakness
that would result in more than a remote likelihood of a material misstatement of the
financial statements or would not otherwise be prevented by the City’s internal controls.
They also did not identify any instances of noncompliance or other matters that require
specific communication to the governing body as promulgated by Government Auditing
Standards.
Items of lesser significance are documented as Management Letter comments. We are
pleased to report that there were no management letter comments or instances of non-
compliance concerning federal award programs were noted this year.
You will have the opportunity to speak to the auditors, without staff present. You may
consider any questions that you might have concerning the 2013-14 Audit. Additionally,
as the auditors begin their audit planning efforts for the 2014-15 Audit, you may also
wish to convey any areas of particular concern.
Prepared by: Submitted by:
/s/ Rukshana Virany
/s/ Dan Matusiewicz
Rukshana Virany Dan Matusiewicz
Accounting Manager Finance Director
Attachments:
A. Auditor’s “Audit Committee Letter”
B. Auditor’s “Report on Internal Control over Financial Reporting and on
Compliance & Other Matters”
2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893
Offices located in Orange and San Diego Counties
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2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893
Offices located in Orange and San Diego Counties
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
The Honorable Mayor and
Members of City Council
City of Newport Beach
Newport Beach, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information
of the City of Newport Beach, California (the City), as of and for the year ended June 30, 2014, and the
related notes to the financial statements, which collectively comprise the City’s basic financial
statements and have issued our report thereon dated December 29, 2014.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate
in the circumstances for the purpose of expressing our opinions on the financial statements, but not for
the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly,
we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a material
misstatement of the City’s financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal
control that is less severe than a material weakness, yet important enough to merit attention by those
charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify
any deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December 29, 2014
Communication with Those Charged with Governance
2014 Audit Results
Nitin P. Patel, CPA
Partner
Item No. 5A1
Fiscal Year 2013-2014 Audit Results
Presentation
February 26, 2015
Outline
Scope of Services
Auditors’ Opinion and Reports
Communication with Those Charged with Governance
New GASB Standards
Scope of Services
Audit of the annual financial statements for the year
ended June 30, 2014 in accordance with Generally
Accepted (US) and Governmental Auditing Standards
Audit of federal grant expenditures under OMB
Circular A-133
Agreed-Upon-Procedures related to the City’s
calculation of the GANN limit
Auditors’ Opinion
Audit of financial statements for the year ended June
30, 2014
Management is responsible for preparation and fair
presentation of the financial statements
Auditor’s responsibility is to express opinions on the
financial statements
Standards require that audit is planned and performed
to obtain reasonable assurance that financial
statements are free from material misstatement
Auditors’ Opinion
Audit evidence is sufficient and appropriate to provide
a basis of our audit opinions
Unmodified opinions for June 30, 2014
Auditor’s Reports (Single Audit)
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
No significant deficiencies or material weaknesses noted
Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB
Circular A-133 and on the Schedule of Expenditures of
Federal Awards
No significant deficiencies or material weaknesses noted
No compliance findings noted
Communication with Those
Charged with Governance
The planned scope and timing of the June 30, 2014 audit
was communicated to the City’s Finance Committee in a
planning letter dated July 21, 2014
Management is responsible for the selection and use of
appropriate accounting policies, which are described in
note 1 to the financial statements.
No new accounting policies were adopted and the
application of existing policies was not changed during the
year ended June 30, 2014
Management has selected and applied other significant
accounting policies appropriately and consistently
Communication with Those
Charged with Governance
Significant estimates reported in the financial statements include the following:
Fair market value of investments
Value of capital assets (infrastructure assets)
Estimated useful lives of capital assets for depreciation
purposes
Funded status and funding progress of CalPERS defined benefit pension plan
Annual required contribution and actuarial accrued liability for the City’s OPEB
Claims payable liabilities
Communication with Those
Charged with Governance
The most sensitive disclosures affecting the financial
statements include the following:
Note 8 regarding claims payable
Note 10 regarding the CalPERS defined benefit plans
Note 12 regarding the City’s OPEB
Note 18 regarding the restatement of net position
We encountered no significant difficulties during our
audit.
Communication with Those
Charged with Governance
No such disagreements arose during the course of our
audit.
Representations related to audit obtained from
management in a letter dated December 29, 2014.
To our knowledge, the City did not consult with other
accountants regarding auditing or accounting matters.
New GASB Standards
GASB 68
Accounting and financial reporting for pensions
GASB 69
Government combinations and disposals of
governmental operations
GASB 71
Pension transition for contributions made subsequent to
the measurement date
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5B February 26, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Steve Montano, Deputy Finance Director
(949) 644-3240 or Smontano@NewportBeachCA.gov
SUBJECT: ERP Update
SUMMARY:
ERP (Enterprise Resource Planning) software is a business management software
system that integrates all of the City’s core functional requirements for financials, human
capital management, citizen services, and revenues. The ERP implementation is
scheduled to take between 25 and 30 months and will consist of five major phases. The City is currently in Phase 1 (Financials) and began the implementation of Phase 2
(HR/Payroll) in January 2015. The software provider of the City’s ERP is Tyler
Technologies Inc. and this project is titled “eSAIL,” short for ERP System Administration
and Implementation Lineup.
Staff concluded the five-month series of Business Process Consulting (BPC) sessions
with Tyler consultants in November. The purpose of the BPC sessions was to develop
software configuration specifications according to the City's business needs for the
following Phase I module applications:
General Ledger Budget Projects and Grants
Purchasing Accounts Payable Contracts Management
Inventory Fixed Assets
The graphic below depicts the various project phases, dates, and current status.
ERP Update February 26, 2015
Page 2
Between January and May of 2015, Finance Department staff will be trained on how to
use the system and will prepare for end-user training that is scheduled for June 2015.
Finance and Tyler staff will share the responsibility of training nearly all City staff on how to use the new system. Over the past several months the City’s IT group participated in all the BPC sessions, completed the ERP system administration setup, were trained
on security and workflow, configured E-mail within the new system, and worked with
the IT staff within the Police Department to synchronize the two networks. The IT group
recently participated in training sessions to set up the new system dashboards that will provide end-users with charts, graphs, and other statistics regarding financial
information within their respective areas.
This important project must foster an environment of change in order to allow for the
creation of more efficient and effective processes to support the City's mission and goals. With the many changes to the City's business processes that are expected, City
staff must be prepared to adapt. To assist in this regard, representatives from Tyler
periodically assess through surveys our organization’s ability to handle change. The
survey results so far indicate that the City has strong leadership and project
management skills to support the eSAIL project. Department representatives who make up the Change Management team meet regularly and disseminate eSAIL project
information. They also advise project managers where additional training or resources
are needed for project success.
The eSAIL Change Management team recently met with 80 mid-level managers throughout the City to provide some information about process changes and new
system functionality they can expect when the Financials go live in July 2015.
RECOMMENDED ACTION:
Receive and file.
ERP Update February 26, 2015
Page 3 Prepared and Submitted by: /s/ Steve Montano
_______________________
Steve Montano
Deputy Director, Finance
ERP Update
February 26, 2015
Item No. 5B1
ERP Update
Staff Presentation
February 26, 2015
ERP System – Information is Power
•Improve operations, with emphasis in budgeting, reporting,
and fiscal management
•Increase staff productivity – focus more time on decision
support activities as opposed to focusing on transaction
processing activities
•Organization-wide software integrates departments and
functions into one system
•Citizen Self Service – citizens can pay bills via the internet
and file non-emergency requests
•Incident Management – citizens can report pot holes, loss of
water, and other activity in their neighborhoods (tied to
Work Orders module)
Benefits
Project and Executive Sponsors
Dave Kiff – Terri Cassidy and Dan Matusiewicz
Project Managers
Sheri Anderson, Steve Montano
and Patty Burkhard (Tyler)
Financials
Project Team
Financial
Subject Matter
Experts
HR Project
Team
HR Subject
Matter Experts
Steering Committee
Steve Montano, Sheri Anderson, Rob Houston,
Dan Matusiewicz and
Jackie Luengas
IT Project
Team
IT Technical
Team
Change Mgmt. Team
Jackie Luengas, Laurie
Berger (Tyler), Sheri Anderson and Steve
Montano
Department
Coordinators
eSAIL Implementation Team
Project Schedule
ERP Implementation Life Cycle
MUNIS FINANCIALS
PHASE I (MAY 2014-JULY 2015)
Functional Area Module
1 System Wide
(IT)
•Munis Analytics & Reporting
•Tyler Content Manager Standard Edition
•Tyler Forms Processing
•Tyler Secure Signature Key System
2 General Ledger /
Chart of
Accounts
•Accounting General Ledger (Core Financials)
•Cash Management
3 Budgeting •Budgeting
4 Purchasing •Purchase Orders
•Requisitioning
•Contract Management
•eProcurement
5 Accounts Payable •Accounts Payable
6 Project / Grant
Accounting
•Project / Grant Accounting
7 Fixed Assets •Fixed Assets
•BMI Asset Track Interface
8 Inventory •Inventory
•BMI CollectIT Interface
9 CAFR •CAFR Statement Builder
CORE HUMAN RESOURCES/PAYROLL
PHASE II (JANUARY 2015 – JANUARY 2016)
Functional Area Module
1 System Wide (IT) •Munis Analytics & Reporting
•Tyler Content Manager Standard Edition
•Tyler Forms Processing
2 Human
Resources
•Human Resource Management
3 Payroll •Payroll w/ Employee Self Service
4 Employee
Expense
•Employee Expense Reimbursement
5 Learning
Management
•Professional Development
UTILITY BILLING - PHASE III
(JUNE 2015 – MAY 2016)
Functional Area Module
System Wide
(IT)
•Munis Analytics & Reporting
•Tyler Content Manager Standard
Edition
•Tyler Forms Processing
1 Utility Billing •Utility Billing CIS
•UB Interface
•Citizen Self Service
•Maplink GIS Integration
•Central Property File
2 Accounts
Receivable/
Billing
•Accounts Receivable
•General Billing
•Tyler Cashiering
WORK ORDERS AND BUSINESS LICENSE – PHASE IV
(OCTOBER 2015 – JUNE 2016)
Functional Area Module
System Wide
(IT)
•Munis Analytics & Reporting
•Tyler Content Manager Standard
Edition
•Tyler Forms Processing
1.a Work Orders •Work Orders
•MapLink GIS Integration
•Central Property File
•Standard Fuel Interface
1.b Fleet &
Facilities
•Fleet & Facilities Management
2 Incidents •Tyler Incident Management
3 Licensing
Solutions
•Business License
4 Budget •Performance Based Budgeting
Implementation Phases
*** Red Modules (New or Automated)
Dashboards finally ….
∗We organized an implementation team
∗Met with all Department Directors and asked for
their input
∗“As is” - Analyzed our current business processes
∗Brain stormed the “To be” processes with subject
matter experts
∗Applied Best Business to the processes
∗Make sure that the new processes produce
improved results, better data, accessible data, less
paper, and opportunity to better serve the
community
Summary of Project Implementation Method
Questions?
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5C
February 26, 2015
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Steve Montano, Deputy Finance Director
(949) 644-3240 or smontano@newportbeachca.gov
SUBJECT: Finance Committee 2015 Work Plan
SUMMARY:
Staff will present and seek approval of the tentative Finance Committee agenda topics
scheduled for the year. The work plan represents the planned topics of discussion;
however, is subject to change based on the availability of information and the need to
schedule other topics as they arise.
RECOMMENDED ACTION:
Receive and file.
Prepared and Submitted by:
/s/ Steve Montano
_____________________________
Steve Montano
Deputy Finance Director
Attachment: Proposed 2015 Finance Committee Work Plan
2/20/2015
I:\Users\FIN\Shared\Admin\Finance Committee\Reports\2015\February 2015\STAFF REPORTS\Item 5C_FINANCE COMMITTEE 2015 WORK PLAN\2015 Workplan 1
Scheduled Date Agenda Title Agenda Description
Thursday, February 26, 2015 Audit Review (with Auditor)The City’s external audit firm, White Nelson Diehl Evans LLP will meet with the
Finance Committee to discuss the audit findings for the fiscal year ending 6/30/2014. The committee will have an opportunity to discuss any potential
areas of concern and the auditors can discuss any changes in accounting
standards or disclosures that were relevant for the audit year.
ERP Update Staff will provide the Committee with a progress report on the Enterprise
Resource Plan project to receive and file.Work Plan Overview Staff will present and seek approval of tentative Finance Committee agenda
topics scheduled for the year.
Tuesday, March 10, 2015 Joint Finance Committee and City Council Study Session Staff will provide a brief financial update and see a first look of the proposed Capital Improvement Projects.
Thursday, March 26, 2015 Review of Facilities Financial Planning Tool (FFPT) Annual review of the City's FFPT.
Reserve Policy Review Review of Reserve Policy F-2
Thursday, April 16, 2015 2015-16 Budget Overview Staff will provide an overview of the proposed operating budget.ERP Update Staff will provide the Committee with a progress report on the Enterprise Resource Plan project to receive and file.
Thursday, May 14, 2015 Fee Schedule The purpose of this meeting is to review staff’s recommendation to revise the Master Fee Schedule according to CPI and to review the specific changes
recommended for departmental related fees.Thursday, May 28, 2015 ERP Update Staff will provide the Committee with a progress report on the Enterprise
Resource Plan project to receive and file.
No Meetings Recommended ERP - Financial System "Go Live"
Thursday, September 10, 2015 Investment Policy Review Staff will present its annual review of the City's investment policy and seek
approval and guidance from the Finance Committee regarding the scope, objectives, and standards that govern the City's investment portfolio.
Investment Performance Review Staff and/or one or more investment advisors will describe the performance of
the City's investment portfolio.ERP Update Staff will provide the Committee with a progress report on the Enterprise
Resource Plan project to receive and file.
No Meeting Recommended
Thursday, November 12, 2015 Year-End Closing Results Staff will present the preliminary year-end closing results for FY 14/15.
Review of Post Employment Retiree Insurance Actuarial Valuation (AKA OPEB)The City's OPEB actuary will review the City's latest OPEB valuation and liability.
ERP Update Staff will provide the Committee with a progress report on the Enterprise Resource Plan project to receive and file.
Thursday, December 10, 2015 Year-End Closing Results Staff will present the preliminary year-end closing results for FY 14/15.
Review of Public Employees Retirement System (PERS)
Valuation
Staff will present the latest actuarial valuation changes to actuarial
assumptions, a review of investment returns, the potential impact of future rates, and the results of employee cost sharing.
ERP Update Staff will provide the Committee with a progress report on the Enterprise Resource Plan project to receive and file.
September
November
December
City of Newport Beach Finance Committee Work Plan 2015
February
March
April
May
June - August
October