Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO: Vancouver City Council

FROM: General Manager, Corporate Services Group

SUBJECT: Financial Services Department 1999-2001 Strategic Direction and

RECOMMENDATION

CITY MANAGER'S COMMENTS

This new role will be enhanced by a flatter organizational structure supported by both a management team approach and more collaborative relationships with operating departments on financial management processes. The reallocation of key functions, enhancement of business processes, and replacement of some former management positions with professional staff level positions will increase efficiency and effectiveness.

COUNCIL POLICY

Establishing new positions requires Council approval.

City Council, as a matter of directing effective municipal government, endorses organizational changes that improve City services, especially if cost savings are involved in the changes.

SUMMARY

The City's financial health and fiscal accountability depend on sound financial policy, planning and management. The City of Vancouver has historically enjoyed a Triple A credit rating and we have a responsibility to maintain this standing and build further on our financial strengths. To that end, the Financial Services Department senior management has identified specific internal improvements and changes that will continue to protect and enhance the responsible stewardship of the City's fiscal resources.

Our recommendations are based on a recent review of external and internal factors that could affect the City's overall financial management, as well as consultations with members of the Corporate Management Team (CMT), their finance staff and key managers in the Financial Services Department.

Our recommendations are reflected in Strategic Direction; 1999-2001 (see Appendix 1 for highlights). Copies of the Strategic Direction draft document are available for distribution.

In support of this updated strategy, we propose a new organizational structure (Appendix 3). This new structure will increase the department's efficiency and effectiveness, and further enhance its ability to support operating departments' objectives and protect the City's financial health.

PURPOSE

We request Council's approval of the reorganization of the Financial Services Department, based on our proposed 1999-2001 Strategic Direction. By eliminating some existing positions, all new positions will be funded at no additional cost to the City.

BACKGROUND

Beginning last October, the Finance Managers held a series of brainstorming sessions that culminated in strategy-setting sessions held from April to June 1999.

These sessions arose due to a number of factors:

· An assessment of the Financial Services Department's role and service delivery in light of the new SAP enterprise system
· A number of job vacancies and recognition of the need to define a forward strategy before vacancies are filled; and,
· A decision to enhance our customer focus.

As part of this process, a review of the Financial Services Department's current role and services demonstrated a need for both an updated departmental strategy as well as changes in the way current and proposed new services should be delivered.

To assist in planning, Financial Services obtained important comments and input from key stakeholders:

CMT members recommended that we:

· Deliver more long range focussed financial planning;
· Increase the emphasis on financial strategies for balancing taxes, utilization of reserves and investing;
· Provide more consulting service to operating departments, delivering guidance on financial matters and collaboratively supporting their business objectives;
· Enhance the current budget process for earlier scheduling and improved control;
· Provide more financial reporting, including quarterly budget status reports;
· Take the lead in successful SAP implementation;

· Increase the research focus on future trends affecting the City; and
· Update financial policies to reflect a decentralized administration and authority.

Finance Managers generally agreed with members of the CMT. They recommended that we:

· Fill current vacancies in a strategic manner;
· Improve the accounting business processes and upgrade staff's accounting skills;
· Revise the budget process to assist departments in their budget preparation;
· Update financial policies to allow for decentralization;
· Move to more of a "service" orientation;
· Adopt a service strategy for working with the operating departments;
· Move certain functions from their current reporting lines to other divisions;
· Keep SAP implementation on track;
· Re-examine financial reporting - what, to whom, and when; and
· Align internal units in Financial Services to the new Strategic Direction.

Research also indicates that certain existing conditions must be managed to achieve the desired changes:

· Current financial expertise must be increased across functions and at lower staff levels;
· A strong training component is required to upgrade skills;
· Existing business processes must change;
· A customer service philosophy and strategy is required to promote the `client-consultant' relationship.

The strategic planning process led Finance Managers to jointly agree on a 1999-2001 Strategic Direction for the department (Appendix 1). The Finance Managers also agreed on the key functions needed to support the updated strategy (Appendix 2). These key functions have been translated into an appropriate division of responsibilities in the proposed new organizational chart (Appendix 3).

DISCUSSION

Strategic Direction: 1999 - 2001

Finance Managers agree that the department's job is `to provide proactive financial leadership and responsive service to support our customers needs and to ensure the Corporation's financial health.'

This new strategy and organizational structure will provide for a dedicated client service approach in which each operating department will have a single point-of-contact to assist them with their ongoing budget and accounting requirements. The strategy also calls for a customer service model that promotes enhanced financial management for operating departments while ensuring the corporation's fiscal requirements are maintained.

The Strategic Directions document includes goals and strategies, as well as performance indicators organized according to the following categories:

· Delivering skills training to develop strengths in all key functions,
· Ensuring cross training for flexibility and career development,
· Implementing succession planning to create more depth in key positions; and
· Using teams to integrate cross-functional activities.

Key functional requirements to support Strategic Direction

Finance Managers reviewed the essential functions needed to implement the department's strategic direction. During the department's planning sessions and based on consultation with the CMT members, participants agreed that it is essential to focus on four key areas: financial planning, budgeting, accounting and treasury functions:

Financial Planning

Financial planning provides a higher level `future' focus than the current budget process.

Financial strategies are based on sound research of future scenarios, frequent reviews of threats, opportunities, policies and our financial position. With updated strategies, the annual budget process will benefit from a forward-looking focus on recognized priorities and what the City "should be doing". "This is in contrast to the approach which looks at what the City "already does."

Good financial planning will maximize Council's financial flexibility, avoid surprises and continue to adapt to both planned and unplanned demands - all with a minimal disruption in services.

Financial planning activities include, but are not limited to:

· Benchmarking of external agencies;
· Analysis of reserves;
· Reviews of core services, taxing options and the public sector accounting requirements;
· Multi-year scenario planning;
· Creation of key financial indicators;
· Comparisons of municipal financial policies; and
· Reviews of internal policies (to enable operating departments to demonstrate fiscal accountability while achieving operational objectives.).

Budgeting

Budgeting tells us if resources are properly allocated and used.

It can benefit from a collaborative approach with departments to assist them achieve their objectives in a fiscally responsible manner. Our dedicated client service approach and customer service model mentioned earlier will address this.

Essential budgeting activities include providing:

· Efficiency improvements in the current budget process;
· Meaningful and timely management reporting;
· Early warning signals;
· Budget policies;
· Budget performance measures; and
· Program budgeting.

Treasury Services

Investment, borrowing and banking relationships are the major components of Treasury Services.

Currently, the support services are scattered throughout the Department. To increase effectiveness and fiscal accountability, various activities should be consolidated under one function in Treasury. At the same time, the depth of knowledge must be expanded.

Investment activity will benefit by being consolidated according to the entire investment business process, from investment strategies and policies, cash flow management and forecasting to daily investment and performance measurement reporting. On the borrowing side (both internal and external), Treasury Services include borrowing strategies and management.

An important priority is to review the Investment Policy and investment limits in order to optimize investment income within legislative constraints.

Accounting Services

Accounting Services tells us how the City performs financially. Focusing on results, it ensures that:

· Accounting transactions are accurately and promptly recorded;
· Proper controls are in place for accounts receivables and accounts payable; and
· The SAP accounting module is properly used.

Accounting Services will continue to prepare statutory financial reports, capital assets, reserves and funds reconciliation and analysis. It will also address new Public Sector Accounting Standard requirements relating to external financial reporting.

With decentralization resulting from the SAP implementation, more emphasis will be shifted to setting corporate accounting standards and policies within which operational managers can plan and implement their services. The upgraded function will provide a control point for the corporation and professional accounting staff will convey the City's financial position to external agencies (e.g., Revenue Canada and credit rating agencies) and the public.

Organizational Structure

In light of our strategy and functional requirements, and utilizing our departmental vacancies, the proposed new Financial Services structure will result in changes to management positions and reporting relationships. This will require some positions to be deleted and others created at no additional costs to the City. The current Financial Services organizational structure is shown in Appendix 4.

(The current and proposed Corporate Service Group organizational structures are shown in Appendix 7 and Appendix 8, respectively.)

The proposed new structure, guided by the strategy, will:

· Improve the delivery of services by the department;
· Provide opportunities for existing managers and staff to take on new responsibilities and develop new skills and acquire added-value experiences; and
· Foster a stronger team spirit.

This flatter and more accountable structure is less costly than the present one (see Appendix 6). Savings will be deployed to create more front line technical staff who can provide the customer service approach in the new strategy.

Changes proposed, include:

Delete Director of Finance (PG 444); with the General Manager, Corporate Services, named the Director of Finance

Whereas the primary responsibility for financial management was previously vested in a single position (Director of Finance), accountability should be distributed among senior management of Finance.

The proposed structure is a `flatter' one, placing ultimate accountability for treasury and finance statutory obligations on the General Manager (as defined in The General Manager, Corporate Services Group's Position Description). It also enables the General Manager, through the director and manager positions proposed, to ensure the CMT is advised on all financial issues, decisions, strategies and performance indices.

Create Director, Financial Planning and Treasury Services (PG 441)

As a senior management function, this position has Financial Planning and Treasury Services as its core functions.

The incumbent will work as a team with the Manager, Budgets and Director, Financial Services, reflecting the interdependencies among these key functions. The individual assigned to this position will work closely with operating departments to seek their input and to ensure their needs are addressed.

This position will report to the General Manager, Corporate Services and is funded by deleting the former Director of Finance position (PG 444).

Create Manager, Financial Planning (PG 434)

This position will use research and analytical processes on two fronts:

· Externally to stay current with developments in other municipalities and provincial and federal agencies, and emerging taxpayer expectations, economic, demographic, and environmental factors;
· Internally to better understand past financial performance results.

The resulting information will provide necessary support to the development of corporate financial strategies and the annual budgeting process. Access to this kind of intelligence information is a key expectation of the operating department managers interviewed in the planning process.

This position will work closely with operating departments to seek their input, and utilizing their knowledge of their operations.

This position will report to the Director, Financial Planning and Treasury Services and is funded by deleting the Deputy Comptroller of Budgets and Research position (PG 434).

Create Manager, Budgets (PG 436)

This position is needed to focus solely on budgeting and to make the proposed changes to the current process. It will add to the current depth of budgeting expertise within the Finance Department.

This position will report to the General Manager, Corporate Services and will replace the Comptroller of Budgets and Research position (PG 438).

Reclassify Manager, Treasury Services (PG 436)

This position is currently mainly responsible for investment whereas borrowing expertise rests largely with the former Director of Finance. The reorganizational proposal calls for merging both investment and borrowing under one manager. To provide greater, more specialized focus and protect the Corporation's financial assets, the Treasury (Investment function will be removed from the Revenue Services Division.

The current paygrade ($53,000 to $63,000) is well below the market standard ($80,000 to $85,000). As a result, we have had great difficulties retaining qualified investment professionals. The added borrowing responsibilities will support a salary range that may enable the City to attract a qualified person who can meet the key financial objectives.

This position will also undertake the statutory duties of the Treasurer and will report to the Director, Financial Planning and Treasury Services. It is a reclassification of the Manager, Treasury position (PG 430).

Create Accountant (PG 428)

According to an analysis of the workload and a realignment of functional responsibilities, there is no need for both a Treasury Analyst and Manager, Treasury Services. By deleting the Treasury Analyst position, savings will be applied to a new professional accountant position to bridge the existing shortage in professional accountants.

This new position is offset by deleting the Treasury Analyst position (PG 428).

Reclassify Manager, Revenue Services (PG 433)

This role will concentrate on revenue services exclusively and will plan and implement ways to enhance the revenue operations. It will have added responsibility for overseeing the operation of by-law fines collection and property tax and utility billing. This new position, along with the others proposed in the new structure, will allow present incumbents to make career advancements. It will also add to the depth of expertise and flexibility within the department as-a-whole.

This position will also undertake the statutory duties of the Collector and will report to the Director, Financial Planning and Treasury Services. It is an upgrade to the Manager, Revenue Operations position (PG 431).

Reclassify Director, Financial Services (PG440)

Aside from all the accounting operations, this position will take on the additional functions of Material Management and Revenue Services.

It will address the need for a professional accountant in an independent role who, by working closely with the Director, Financial Planning and Treasury Services and the Manager, Budgets, can enhance overall financial performance.

This position will report to the General Manager, Corporate Services and will replace the Comptroller, Accounting (PG 438)

Create Senior Accountant (PG430)

Our planning process shows a shortage of qualified accounting practitioners. At the same time, there is a need to upgrade the current accounting skills and practices among staff. Addressing this situation will require additional staff with a professional accounting designation. The availability of a senior accountant position may also encourage staff to undertake a professional designation.

This position will report to the Manager, Accounting Services and is funded by deleting the Manager, Financial Services position (PG430)

In the Business Support Services Department, the following changes are envisioned:

Create Manager, Administration and Special Projects (PG438)

This position is separated from day-to-day activities, and focuses on handling Corporate Services Group's budget co-ordination, improving internal systems and operational efficiencies, facilitating special projects and business process reviews and creating together with other operating departments, a `one-stop shopping' service. Development of a customer service model is an immediate priority for this position.

This position will report to the Director, Business Support Services. Funding comes from deleting the Treasurer and Collector position (PG438).

NOTE: A report will be submitted to Council in September seeking approval of specific individuals as Treasurer and Collector for statutory requirements. Until then, Ms. P. Bruin, currently the Treasurer and Collector, will continue to fulfill the statutory requirements.

Downgrade Director of Operations Support (PG 442), rename Director of Business Support Services (PG440)

A review of the functions indicates that this position should be downgraded.

Financial Implications

The new organizational structure will not require additional funding; changes will be accommodated within the existing budget allocation. We also expect that the new strategy and structure will be implemented through refocused activities and improvements in systems, methods and procedures.

Our changes may result in savings of approximately $33,000 (Appendix 6). Savings will be used for human resource development (e.g. upgrading skill shortages in all department functions).

The senior management in Finance will review specific skill requirements. Exact funding needs will be reported to Council as part of the year 2000 operating budget.

Implementation Plan

The proposed strategy calls for the completion of key goals over the plan period 1999-2001 period. The main steps in the implementation of the strategy, include:

The shortage of skilled managers to implement the strategy, makes approval of the proposed structure, critical.

CONCLUSION

The Finance Managers have reached consensus on a new Strategic Direction for the department, including a statement of Purpose, Performance Measures, Key Goals and the Strategies to attain these goals (Appendix 1). Based on this strategy, we have also reached agreement on the key functions necessary to optimize implementation of the strategy.

The proposed organizational structure supports the goals of the new strategy. The expected outcomes are:

· Greater effectiveness (achievement of goals),
· Greater efficiency (utilization of resources),
· An enhancement of service delivery; and
· An opportunity for staff to broaden their knowledge and acquire new skills.

If implemented, we believe the proposed changes will build on the sound financial record of the City and ensure continuity of our Triple A credit rating. At the same time, they will increase the organization's accountability, improve responsiveness to customer needs, supports the "Better City Government" initiative and provide the Department the flexibility it needs to fulfill its mandate. These would be achieved at no additional cost to the City.

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