2023-04-26 Finance Committee Agenda Packet - Open Session�B
City of Saint John
Finance Committee - Open Session
AGENDA
Wednesday, April 26, 2023
4:40 pm
Meeting Conducted by Electronic Participation
1. Call to Order
2. Approval of Minutes
2.1 Minutes of March 22, 2023
3. Approval of Agenda
4. Disclosures of Conflict of Interest
5. Consent Agenda
6. Business Matters
6.1 Social Procurement (Verbal Update)
6.2 Enterprise Resource Planning (ERP) - System Renewal Introduction
6.3 Service Based Budgeting
6.4 Internal Audit Services
6.5 Saint John Water 10 Year Long Term Financial Plan
7. Adjournment
Pages
1-4
5-15
16-29
30 - 50
51 - 66
Finance Committee Meeting
Open Session
March 22, 2023
MINUTES— OPEN SESSION FINANCE COMMITTEE MEETING
MARCH 22, 2023 AT 4:30 PM
MEETING CONDUCTED BY ELECTRONIC PARTICIPATION
Present: Mayor D. Noade Reardon
Councillor G. Sullivan
Councillor P. Radwan
Councillor G. Norton
Councillor D. Hickey
Also
Present: Chief Administrative Office B. McGovern
Commissioner of Finance and Treasurer K. Fudge
Commissioner Transportation & Environment M. Hugenholtz
Fire Chief K. Clifford
Deputy Fire Chief R. Nichols
Commissioner Utilities & Infrastructure I. Fogan
Commissioner Growth & Community Services J. Hamilton
Commissioner Human Resources S. Hossack
Director Engineering and Chief City Engineer M. Baker
Director Financial Services J. Forgie
Director Financial Services C. Lavigne
Intermediate Accountant V. Parikh
City Clerk J. Taylor
Administrative Officer R. Evans
Administrative Assistant K. Tibbits
1. Meeting Called to Order
Councillor Sullivan called the Finance Committee open session meeting to order.
2. Approval of Minutes
2.1 Minutes of November 21, 2022
Moved by Councillor Hickey, seconded by Mayor Noade Reardon:
RESOLVED that the minutes of November 21, 2022 be approved.
MOTION CARRIED.
3. Approval of Agenda
Moved by Mayor Noade Reardon, seconded by Councillor Radwan:
RESOLVED that the agenda of March 22, 2023 be approved.
MOTION CARRIED.
4. Disclosures of Conflict of Interest
No disclosures.
5. Consent Agenda
Finance Committee Meeting
Open Session
March 22, 2023
5.1 RESOLVED that the Budget 101 Infographic be received for information.
5.2 RESOLVED that the How is Money Spent in the City Infographic be received for information.
5.3 RESOLVED that as recommended in the submitted report "2023 General Fund and Utility Fund
Capital Budget Update" the Finance Committee endorse the following recommendations and forward a
copy of this report to Common Council for approval:
Recommend approval of transferring up to $2 million dollars from the General Fund Capital
Reserve, as needed, to offset potential cost overruns on the 2023 General Fund Capital Budget as
a result of supply chain and other inflationary pressures;
Recommend deferring General Fund Capital Budget Projects if cost overruns due to supply chain
or other inflationary pressures exceed $2 million dollars based on the priority rankings in
Appendix 1 (i.e., Priority ranking 4 would be utilized first); and,
Recommend deferring three Utility Fund Capital Projects if required to offset cost overruns due
to supply chain or other inflationary pressures based on the priority rankings in Appendix 2 (i.e.,
Priority ranking 3 would be utilized first).
Moved by Mayor Noade Reardon, seconded by Councillor Hickey:
RESOLVED that the recommendation set out in each consent agenda item respectively be adopted.
MOTION CARRIED UNANIMOUSLY.
6. Business Matters
6.1 Strategic Procurement Policy Update
Mr. Fudge stated that modernization of the Strategic Procurement Policy is a major milestone and a
priority in the 2023 workplan.
Ms. Forgie reviewed the submitted presentation "Procurement Policy Modernization Project." The policy
updates procurement practices to be more efficient and strategic to enhance the city's financial
health. It incorporates changes in public procurement and includes recommendations from the
Ernst & Young Operation Review, such as Supplier Performance and Contract Management,
reduction of Payment Vouchers, red -tape reduction, and spending authority limits. The policy
also considers social procurement practices and promotes supplier diversity, Social Enterprises,
payment of a living wage, inclusive employment practices, environmental stewardship and
support of businesses owned by members of traditionally disadvantaged groups.
Moved by Mayor Noade Reardon, seconded by Councillor Hickey:
RESOLVED that the submitted draft Strategic Procurement Policy be received for information.
MOTION CARRIED.
6.2 General Fund LonL-Term Financial Plan
Mr. Fudge stated that staff is seeking direction on stretch targets in the updated financial plan. In 2019,
the financial management of the city was transformed with a ten-year financial plan and a suite of best
practice financial policies and a performance management and reporting framework. The Long -Term
Financial Plan policy contains a provision that requires two thirds of the total membership of council, or 8
votes, to make changes to the financial policies unless recommended by the Finance Department.
The primary goal of the financial plan is to fund Council's 10-year strategic objectives in a fiscally
responsible manner. Many assumptions used in 2019 require update to reflect current conditions and
actual results. The tax rate was reduced by 16.5 cents since the previous plan. An economic slowdown is
expected in 2023 due to inflation which will impact the housing market, tax base, the City's wage and
benefit package, and GDP growth. Interest rates in 2023 are forecast to be 4.5%, increasing cost to the
city to issue new debt. Further decline is expected in the unconditional grant. Population growth has
exceeded assumptions and there has been a strong post-Covid job recovery, all of which form the
assumptions for the long-term financial plan.
Finance Committee Meeting
Open Session
March 22, 2023
The Finance Committee previously provided direction on the base case which focused on a reliable level
of service and prioritizes funding for strategic plan initiatives over the next 10 years. The stretch case
allows for acceleration of the strategic plan and provides an opportunity to exceed financial targets in
areas of debt, tax rate, reserve funding and infrastructure deficit. Base case assumptions were discussed
as outlined in the submitted presentation. Significant improvements were made in all categories, with
continued significant improvements expected.
Staff requested direction on the stretch case scenarios including assumptions and financial targets, as
outlined in detail in the submitted presentation. Funding the strategic plan is prioritized under both the
base case and the stretch case. Financial health will continue to improve with lower debt and
infrastructure deficit levels and the ability to mitigate financial risk.
Moved by Mayor Noade Reardon, seconded by Councillor Hickey:
RESOLVED that the Finance Committee approve the assumptions and financial targets presented for the
Stretch Case in the 2023-2032 General Fund Long -Term Financial Plan; and further that the submitted
presentation entitled "2023-2032 General Fund Long Term Financial Plan Update" be received for
information.
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6.3 2024 General Fund Budget Proposed Timeline
(Councillor Norton withdrew from the meeting)
Mr. Fudge stated that Council indicated it wants a shorter gap between when the budget goes to the
Finance Committee and subsequently to Common Council, greater participation in the budget process,
and a desire for public engagement. The budget is a representation of Council's plans, many of which have
had extensive public engagement. A module called "Shape your Budget" is being recommended to allow
the community to offer feedback on the budget. Staff will also re -introduce the service -based budget, to
better understand service levels and performance.
Mr. Lavigne reviewed the submitted presentation "2024 General Fund Operating Budget Timelines." He
discussed the key inputs for the 2024 budget including "Shape Your Budget", service -based budgeting,
consideration of the 10-year strategic plan, the long-term financial plan, and plans such as Plan SJ, Play SJ
and Move SJ. Proposed dates with respect to the budget timeline were provided, noting that the budget
process will also include presentations from each of the service areas and larger ABCs, to discuss
workplans and budget submissions.
Moved by Mayor Noade Reardon, seconded by Councillor Hickey:
RESOLVED that the submitted presentation entitled "2024 General Fund Operating Budget Timelines" be
received for information and any questions be directed to staff.
MOTION CARRIED.
6.4 2022 Unaudited General Fund and Utility Fund Financial Results
Mr. Fudge commented on the unaudited results, noting that the auditing process is on -going. A major
adjustment related to the actuarial review of liabilities, which is an accounting entry, accounts for the
biggest part of the surplus.
Mr. Lavigne indicated that the audited consolidated financial statements is expected to be available for
the May Finance Committee meeting. The unaudited results have an approximately $2.46M surplus,
largely attributable to a favourable actuarial adjustment. This is a non -cash adjustment which can
fluctuate significantly year over year due to a variety of factors including interest rates.
The General fund has a surplus of $2,457,732 which is a result of the one-time adjustment of $2,466,342
dueto the actuarial benefit review, meaningthe City's actual operating results is a small deficit of ($8,610)
for year-end 2022. Despite cost overruns in the winter programs, increases in fuel, insurance, and many
other goods in 2022, the risks and cost overruns were managed within the overall budget envelope.
Moved by Mayor Noade Reardon, seconded by Councillor Hickey:
Finance Committee Meeting
Open Session
March 22, 2023
RESOLVED that the submitted presentation entitled "December 31, 2022 Unaudited Financial Results
General Fund and Utility Fund" be received for information and any questions be directed to staff.
MOTION CARRIED.
Adjournment
Moved by Mayor Noade Reardon, seconded by Councillor Radwan:
RESOLVED that the Finance Committee meeting be adjourned.
MOTION CARRIED.
The Finance Committee open session meeting held on March 22, 2023, was adjourned at 6:20 pm.
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41
FINANCE COMMITTEE REPORT
Report Date
April 20, 2023
Meeting Date
April 26, 2023
Service Area
Strategic Services
Chairman Sullivan and Members of Finance Committee
SUBJECT. Internal Audit
OPEN OR CLOSED SESSION
This matter is to be discussed in Finance Committee Open Session.
AUTHORIZATION
Primary Author
Commissioner/Dept. Head
Chief Administrative
Officer
Jodie Forgie
Kevin Fudge
J. Brent McGovern
RECOMMENDATION
Finance Committee recommends the approval of the Internal Audit Plan for 2023
to Common Council.
EXECUTIVE SUMMARY
The purpose of this report is to provide the internal audit plan for the 2023
calendar year which includes implementing Enterprise Risk Management.
PREVIOUS RESOLUTION
N/A
STRATEGIC ALIGNMENT
The recommendations are in alignment with following a strong governance
process, providing accountability, Financial Stewards and operational
improvements.
REPORT
Internal audit is guided by the philosophy of adding value to improve the
operations of the City. The internal audit services will support the strategic goals
of the City, the ongoing projects and plans that the City is executing on and
providing good governance and monitoring of internal controls.
10191
-2-
The internal audit services reports administratively to the Chief Financial Officer
and functionally through the Finance Committee to Common Council. Depending
on the particular project being performed will impact who the stakeholders will
be with the opportunity to provide benefit to diverse needs within the City.
The internal audit plan includes the completion of a 2022 approved internal audit
and the roll out of Enterprise Risk Management.
SERVICE AND FINANCIAL OUTCOMES
Both Service and indirect financial outcomes are expected from the current work
being proposed as it will provide assistance to management in identifying and
mitigating risks to achieving the City's strategic objectives.
INPUT FROM OTHER SERVICE AREAS AND STAKEHOLDERS
N/A
ATTACHMENTS
Internal Audit Plan 2023 and Presentation on Internal Audit Plan
31
The City of Saint John
Internal Audit Plan
2023
Oil
About our services
• Accomplishments in 2022:
o Conducted a Health and Safety Audit which provided 24
recommendations to Management
• Director reports administratively to the Chief Financial Officer and functionally to
Common Council through the Finance Committee
• Establish annual audit plans with a focus on the five priority areas approved by
Common Council for 2021-2026 term
• Perform examinations of the operations of the City and its affiliated bodies and
report on status to Common Council
• Assist Common Council in their governance role of ensuring the accountability of
the Public Service for the quality of stewardship over public funds and for the
achievement of value for money in City operations
1
2023 Audit Plan
091
Our work in 2022
• Continued the work on the Trade and Convention Centre Contract Management
• Conducted the Health and Safety Internal Audit
• Prepared the scoping for the Market Square Contract Compliance Audit
Getting better then yesterday
• Increase the risk register evolution
• Assess talent opportunities (outsourcing, recruitment)
• Identify and leverage tools for continuous auditing and continuous monitoring
• Continue to stay relevant through research, connections and education updates
Audit workplan for 2023
• Focus on talent acquisition
• Complete the 2022 approved internal audit
• Continue ongoing administration of reoccurring audit activities (ie: management
action plans, planning/updating, consulting/advisory for the City)
• Build an Enterprise Risk Management (ERM) Framework and update the Risk
Management Policy (Budget of $25,000)
Audits on the Horizon
• Depending on our resources we will come back later in the year with an
additional audit for completion.
Management Action Plan Update
• ALL Health and Dental Internal Audit Recommendations are complete
o No further actions from Internal Audit
• Two Health and Safety Internal Audit Recommendations are due
o One Complete
o One In progress with new date of Q3 2023
o Remainder due over the next two years and Internal Audit will continue to
monitor and report back
2
2023 Audit Plan
Performance Audits (also
known as Value for
Money/Operational):
Evaluates operational
processes to provide
assurance that objectives
are met and whether
improvements can be made
based on effectivness,
efficiency and economy.
000
ME
M_
)i®oo= — '
LFinancial Audits: Assesses
accuracy, completeness, and
timeliness of financial
reporting
1.Compliance/Regulatory
Audits: Ensures
adherence to established
regulatory requirements
and policies
The three categories of audits
The planning process
provides a disciplined
approach to the
identification of
potential audit
projects. Formal
planning has several
benefits.
The plan is based upon the risks and priorities that exist at a certain point in
time. Since we are operating in a dynamic environment, risks and priorities are
constantly changing. Audits can be requested throughout the year which will be
assessed and included as necessary on the audit plan.
When we believe it is in the best interests of the City, an adjustment will be
made to the current audit plan. Changes to the plan and progress achieved on
the plan will be reported to the Finance Committee each year.
The Audit Planning process is comprehensive and comprises several activities:
• identification and classification of auditable areas;
• evaluation of audit areas against standard criteria and risk factors;
• consultation with City Councillors and Senior Management and Staff;
• updating of Service Risk Profiles;
• consideration of resources available and required by project type;
• selection of audit projects;
• presentation of our proposed audit plan to Finance Committee for
recommendation to Common Council; and
• communication of our final audit plan to Common Council for approval.
Enterprise Risk Management
"A structured, consistent and continuous process across the whole organization for
identifying, assessing, deciding on responses to and reporting on opportunities and
threats that affect the achievement of its objectives" (The Institute of Internal
Auditors).
2023 Audit Plan
37
Responsibility for ERM
It is very important to note that Internal Audit will work in a consulting capacity and not
assurance in this initiative. Internal Audit role will not be to make management
decisions, the ultimate choice on risk tolerance and decisions will be with management.
The key areas of contribution by Internal Audit will be:
- Co-ordinating the ERM activities
- Facilitating sessions with management on identifying and evaluating the risks
- Reporting on ERM and ensuring it is kept up to date
- Creating the ERM framework leveraging ISO 31000 as best practice in Risk
Management
Safeguards implemented
In order for Internal Audit to work outside of the assurance role in ERM it is important
to have appropriate safeguards in place such as:
- Treating the engagement as consulting services
- Clear communication on management responsibilities in relation to risk
management
- No risk management decisions will be made by Internal Audit, the manager of the
applicable area will make the decisions
- If an area is part of the Internal Audit responsibilities where risk management
decisions need to be made, those areas will have a process of review performed
by someone independent of Internal Audit
- International Standards for the Professional Practice of Internal Auditing will be
followed
Continue to change
Staying relevant is crucial to providing valuable information and recommendations to
the City and it's stakeholders. Our goal is to consistently change. As we continue to build
the Internal Audit services at the City you will start to recognize the audit plan and areas
that stay constant, but you will continue to see something new in every plan going
forward every year.
C:
2023 Audit Plan
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