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2009-01-29 Finance Committee MinutesFINANCE COMMITTEE CITY OF SAINT JOHN MINUTES THURSDAY, JANUARY 29, 2009 - 4:00 p.m. Present: Deputy Mayor Chase, Chair Councillor Court Councillor Killen Councillor Mott Councillor Sullivan Greg Yeomans Cathy Graham Kevin Fudge Hilary Nguyen Also present — Barbara Mahaffy, Recording Secretary Mr. Bob Crowley of Ernst & Young was also in attendance. 1. Approval of Minutes — December 3, 2008 On motion of Councillor Court Seconded by Councillor Sullivan RESOLVED that the minutes of the December 3, 2008 meeting be approved. 2. Adoption of Agenda On motion of Councillor Killen Seconded by Councillor Mott RESOLVED that the agenda for the January 29, 2009 meeting be adopted. Question being taken, the motion was carried. 3. Presentation on PSAB — Cathy Graham Mrs. Graham opened her presentation by reviewing what PSAB means to the City and its importance. The Province of New Brunswick has not changed legislation but they have mandated that we must adopt PSAB and be PSAB compliant by December 31, 2009. New Brunswick is one of the last provinces to be PSAB compliant. This also affects the various agencies, board and commissions that are under the City's control. Councillor Court asked if there was money in the budget for PSAB and was told that there was. Councillor Killen asked if the date of December 31, 2009 was earlier than expected. It will be important when we report on the 2009 fiscal financial statements. We need to be PSAB compliant to get Federal and Provincial funding. The Federal Government will want to see PSAB compliance when items are submitted for funding for next year. Whereas we may be required to be PSAB compliant in order to receive federal funding, they realize, however, that it will take New Brunswick a long time to be fully complaint. There has not been very much guidance from the Province of New Brunswick in order for everyone to be PSAB compliant. Mrs. Graham noted that this process requires support from the top down to ensure we have the resources to do it, as well as guidance and team work. Deputy Mayor Chase asked if we were providing resources to the other departments and was told that we are to the extent that we can, but will require assistance in this regard. Councillor Court inquired if there was funding available for PSAB from the Province of New Brunswick or the Federal Government. Mrs. Graham responded that we have asked for funding but have not had a response so far. PSAB compliance will help Common Council meet its goal of running the city in a sustainable manner because it will provide yearly information on the state of the infrastructure, which will help in setting priorities. It will also help in asset management by providing information to track, maintain and replace assets. The tangible capital assets portion of PSAB will be a major change for the City. We must work with the departments to determine the value of each asset with documentation for audit purposes. Councillor Court asked how much money it will cost to do this. Mrs. Graham responded that it depends on the condition of the information on assets. Each municipality is different. Mrs. Graham stressed the importance of the 3 Cs — coordination, cooperation and collection — to achieve this process with dedicated staff. Councillor Killen asked how we put a value on a road (considered an asset) except using replacement cost. Mr. Fudge responded that that is one way to do it, but there is a calculation or formula that can be used to determine this value. Councillor Sullivan inquired if depreciation cost is going to show up in the departmental costs during budget time (fiscal charges and debt replacement represents depreciation now) and will this have an impact on our budget next year. The response stated that we will probably be submitting two sets of statements for the Province — one under the funding model and one under PSAB requirements. Mrs. Graham noted that an outside consultant cannot do this on their own. They would need to have staff members involved who have knowledge of the City to work with them. We will still need an outside consultant to review the processes and verify what we have done and /or are doing. She indicated that the City of Saint John, Fredericton and Moncton have appealed to the Province to establish a working group and to provide dedicated resources for this issue which they have not done. It was mentioned that once PSAB is set up, the costs will not be as large. Fredericton has hired a permanent position to focus solely on PSAB and other staff have been dedicated to assist, as well as consultants have been used. We need to have all departments working together on this for it to work. Mrs. Graham stressed the importance of having everyone's support to make this happen or it will be particularly difficult to put in place and noted that this must be a priority. She also stated that this needs to be on the Common Council's priority list so all departments will realize the importance of this issue. Councillor Court asked if there is anything in writing from the Province mandating the City to implement PSAB. Mrs. Graham has asked for a letter from them but, as yet, has not received anything. We did receive an email on their current position. It is felt the province currently does not have the human resources to deal with this. Councillor Killen stated that the City of Saint John should go ahead with this as it will make it easier to explain the issues that the City faces by showing actual numbers. It does require Common Council's support for the long -term and it will help people understand the spending. Councillor Sullivan asked if PSAB compliance was necessary to receive funding from the Federal Government. Mrs. Graham noted that there is nothing in writing to this effect but they do use this terminology and reference it in their agreements. She did note, however, that the Federal Government is looking for GAAP statements which would indicate PSAB compliance. Currently, the Federal Government is requiring PSAB on a project by project basis. Mr. Yeomans noted that some departments see this as an opportunity to get control of their assets. However, we need to have some consistency and need to develop a procedure to do this so that everyone is on the same page. The question was raised about the involvement of Corporate Planning in this process. The response was that we need to work collectively with them; however, Finance needs to get this done. Both Deputy Mayor Chase and Councillor Sullivan agreed that there needs to be a presentation to Common Council on this issue as it is a good knowledge tool. Councillor Killen added that it should also be presented to other departments as a good knowledge tool. The presentation to Council needs to come from the Finance Committee and should be in a Council- friendly format. Mrs. Graham noted that there is no money in the budget to steal resources from other areas to accomplish this; however, there is some money in the budget for consultants. How much we spend on consultants depends on how many internal staff are involved. Mr. Crowley noted that, from an auditor's perspective, he expects the City to work towards PSAB compliance in 2009. 4. Presentation on Value for Money (or Performance) Audit — Bob Crowley Mr. Crowley noted that Performance Audits are more than a Value for Money Audit. Performance Audits, which are used regularly by the Federal Government, are systematic examinations of government activities, looking at such things as efficiency, cost effectiveness and who is responsible. He asked if the City wants to incorporate this into its audit process for the overall goal of continuing improvement. This audit can be set up as an internal process. Deputy Mayor Chase asked Mr. Crowley to identify areas they should be looking at. Mr. Crowley asked the committee if this is something they want to have as part of the on- going processes of the City. If so, the City needs to establish something that will be there for the long term and to consider how it would be set up and devised. Councillor Killen asked if this would mean having an auditor - general for the City and was told that this would be external to this Committee. We would need to define the process and objectives and what areas to deal with. Councillor Killen also asked who decides what should be audited. Mr. Crowley responded that once the process is developed, they need to define the areas they want to look at, which are usually the areas where there is the most risk as this tends to be a risk -based audit process. Mr. Yeomans noted that we need to decide if we are talking about a long -term commitment and, if so, then decide what to do. It depends on the vision as to how this audit is structured. Deputy Mayor Chase noted that he would not like to use this to validate why we do things, but to determine what are our best practices and could we do more with the same dollars. Mr. Crowley noted that we could benchmark certain items or areas to determine where we can improve and, as well, find our best practices out of this process. Deputy Mayor Chase asked Mr. Crowley how he defines risk. Mr. Crowley defined risk as where you could be losing the greatest number of dollars and where there are the greatest number of inefficiencies or an area where we are losing assets. Mr. Crowley noted that we already have internal benchmarks. Deputy Mayor Chase noted that no one owns this process yet — there is $100,000 in the budget. Councillor Sullivan felt that it should be owned by senior management as it is their responsibility to make sure the City is run efficiently. Deputy Mayor Chase noted that this process needs a political driver with Mr. Yeomans at the top. Mr. Yeomans suggested that this Committee find out what Common Council wants to do as we need consistency in order to go forward. Councillor Killen felt that this Committee needs to take the lead on this, with Councillor Sullivan disagreeing, saying that in order to be effective, this Committee cannot spread themselves too thin. He suggested an Oversight Committee be put together consisting of the Finance Committee Chair, the Commissioner of Finance, the City Manager and the Mayor. The formation of this Committee could come as a recommendation from the Finance Committee. Mr. Crowley noted that the Committee needs to determine what it is they want to do and ensure that this Oversight Committee has the right mandate. Councillor Killen stated that the Finance Committee needs to champion this. As the Committee was going to be discussing items of a personnel nature, it was decided at this time to go into a closed session. Deputy Mayor Chase stated that the next step in moving towards a Performance Audit process is to hire an outside consultant. This Committee needs to put together a concept for presentation to Common Council. Mr. Fudge noted that the Committee needs to define the performance indicators we want to benchmark ourselves against. Mr. Yeomans responded that Corporate Planning is trying to establish benchmarks. He mentioned that the Committee could have someone from Ernst & Young come and give us a high level presentation on this. He also noted that the Committee must make Common Council understand that this is a long -term project. There will be an initial cost upfront but it will pay off down the road. Finance Department needs resources, however, in order to achieve this. He also let the Committee know that they will need to meet more frequently if they go this route, as well as meeting quarterly. Mr. Yeomans agreed to look at the calendar and set the next meeting date to have Ernst & Young come in to speak on this. On motion of Councillor Sullivan Seconded by Councillor Mott RESOLVED that the Finance Committee will meet with an Advisory Services representative from Ernst & Young to talk about Performance Audits, which is the next step in the establishment of a Performance Audit Program. Question being taken, the motion was carried. It was suggested that a letter be sent from the Committee to the various Commissions, Boards and Agencies, including Saint John Energy, advising them to prepare their budgets for submission by the end of August 2009. On motion of Councillor Killen Seconded by Councillor Sullivan RESOLVED that a letter be given to Common Council from the Finance Committee advising them that the Committee is consulting with the Auditor of record and developing a process and framework concerning the Value for Money issue for Council's consideration. Question being taken, the motion was carried. The meeting adjourned at 6:30 p.m.