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FIN 27-15
C`t,1 00 Report to 111. gelle Executive Committee PICKERING Report Number: FIN 27-15 Date: November 9, 2015 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: Financial System Status Update Recommendation: That report FIN 27-15 from the Director, Corporate Services & City Solicitor be received for information. Executive Summary: The Corporation and its staff require a financial system that meets the current and future information needs of the City. The need for a new financial system was recognized by Council in 2012 as a Corporate Priority. The purpose of this report is to provide Council with a status update regarding the new financial system. The City's financial system consists of property tax, general ledger, accounts payable, accounts receivable, budgeting, payroll (external provider), asset management and purchasing. The City went live with its new property tax system (Tax Manager) or TXM on May 2, 2015. The 2015 final and supplemental tax bills were issued using TXM. This year, the City hired Deloitte Consulting to undertake a financial system review and develop a business case as it relates to the City's financial system. The Deloitte study is attached to this report. The report's conclusions are very clear. The financial system review considered several alternatives including maintaining the status quo and various vendor strategy options. The report does not recommend that the City continue with the status quo due to system risks (failure) and higher potential future operating costs. Within four to seven years, there is a high probability that the current financial system may not function due to system compatibility and security issues. The next step in the process is to develop a Request for Proposal (RFP) for a new software system and implementation. The specifications for the new system will include estimated transaction volume related to Seaton and downtown intensification. Planning for the new financial system will take into consideration current and future development of the City. The 2016 Budget will include consulting resources to develop the RFP and evaluate the various submissions. The 2017 budget will include funding to purchase the system and to implement the new software over a two year period. FIN 27-15 November 9, 2015 Subject: Financial System Status Update Page 2 Financial Implications: The consequences of doing nothing may pose a serious challenge to the financial management of the corporation. As stated on page twelve of the Deloitte report, "inevitably the system will fail to meet requirements and the fix/upgrade will be challenging with costs substantially higher than a planned replacement." The City has an opportunity to pursue a complete, comprehensive approach to system replacement and avoid higher conversion and operating costs. Discussion: In December 2013, Council approved report FIN 28-13 awarding the property tax software and implementation contract. The implementation of the new system started in July, 2014 and was completed on May 2, 2015. Taxation, Accounting and IT staff have completed the implementation, training and testing. Automated interfaces were developed so that the new tax system would be able to retrieve and update information automatically. As expected, there were challenges and headaches during the system implementation. To reduce complexity, it was decided that only the account balance for each roll number tax account would be converted to the new system and the previous transaction history from 1997 to May system. history 1, 2015 would remain in the old s stem. The transaction histo is still available with the old system. Over time, there will be less need to access the previous transaction history. As stated above, the live date was May 2, 2015 and taxation staff are using the new property tax system on a daily basis. The 2015 final and supplemental tax bills were issued with the new system and the new arrears statement has a more professional appearance. The new property tax system had two major cost components: implementation and hardware/software cost. The City had to update its Oracle database management software to operate the new property tax system. The upgraded Oracle software is also being used to run other City systems. With the new Oracle software, the City avoided $10,000 in upgrade costs. The total project budget was $400,000 and the estimated final cost is $320,000. The residual balance of$80,000 will be returned to the Financial Systems Reserve. These funds will be applied towards the purchase of a new financial system suite. Property Tax Changes and Opportunities Taxation staff took advantage of the new property tax system to introduce two new Pre- authorized Tax Payment or (PTP) options. These new plans allow for payments on the 16th 8 th or 16 day of each month. All plans were converted to a 12 month payment plan in Y p PY p contrast to the 11 month plan. The introduction of the new plans was in response to the many requests from Pickering residents over the last few years, asking for a 12 month plan. The 8th day plan was introduced to meet pensioners' requests to have a plan that would accommodate their pension direct deposit schedule. The 16th day plan was introduced to meet the demand for those individuals who are paid on a mid-month basis. FIN 27-15 November 9, 2015 Subject: Financial System Status Update Page 3 To communicate the changes, the Taxation section developed a PTP brochure to explain and highlight the changes. In the last two weeks of November, Taxation staff will advertise via the community page section of the Pickering News Advertiser, reminding PTP participants that there is still a December payment. In November, PTP customers will receive their notice outlining their payments for the first six months of 2016. Included in that notice will be a reminder slip regarding the 12th payment in December. Opportunity— Interim Due Dates Members of Council may recall that with the new tax system, the City changed its tax bill format. The new tax bill is larger and easier to read. In addition, the new property tax bill provides the City with an opportunity to expand the number of installments from two to three. During the recent City open house (Doors Open), taxation staff asked Pickering residents if they preferred the interim billing to have two or three installments. The proposal is three installment dates for the interim tax bill consisting of February, March and April in contrast to the current two installment dates of February and April. Taxation staff received a total of 32 responses from the six hour session, of which 26 Pickering residents were in favor of the change. From an interest revenue perspective, the proposed change is basically cost neutral. Future Tax System Projects The TXM vendor is currently working on an electronic property tax bill module that will be available in 2016. This module will be provided to the City at no cost. The 2016 taxation staff work plan is to continue to develop their expertise and knowledge with the new system and to implement the electronic billing module in 2017. Financial System Review and Business Case During this year, Deloitte Consulting Services, undertook an analysis of the City's current financial system. The document is attached to this report. The Deloitte study reviewed the current accounting system and provides several options for the City to consider. The authors reviewed the "Status Quo" option and are recommending that this option not be pursued. The key issues and/or challenges with the current system are: • The City has 24 separate business applications processing financial information and these systems are not fully integrated, resulting in lost opportunities in efficiency and decision making. • Processes are manual and require significant staff effort leading to increased cost and financial risk. • Current system reports provide limited information and do not provide flexible reporting capability for operational and management decision making. FIN 27-15 November 9, 2015 Subject: Financial System Status Update Page 4 • Current financial controls are manually intensive and rely on the experience and reliability of key finance staff. The financial systems plan is to replace the core accounting systems: Accounts Payable, Accounts Receivable, General Ledger and Purchasing. Page ten of the report provides a diagram of the current system and shows the relationship among the various other systems and how they are connected directly or indirectly to the City's financial core. Without the financial systems core, the functionality of the other sub systems is reduced. Next Step The next step in the process is to develop the RFP for a new financial software system. This includes developing a document that would incorporate detailed business and system specification requirements. The Corporation would engage Deloitte Consulting to develop these documents and to manage the RFP process, including selection of the vendor and system integrator. Deloitte Consulting is a valued partner in this process as it has many years experience in the procurement and selection of municipal financial systems. Included in this process will be the option to consider a cloud-based accounting system. The cloud accounting solution is a relatively new system that provides up-front economic benefits. Attachments: 1. 2015 PTP Tax Brochure 2. City of Pickering Finance System Review and Business Case • Prepared By: Approved/' nd rsed By: Stan Karwowski Paul Bigioni Division Head, Finance & Treasurer Director, Cor•• . - services & City Solicitor Recommended for the consideration of Pickering City Council / Y/ c9 z7 �°is Tony Prevedel, P.Eng. 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