HomeMy WebLinkAboutContracts & Agreements_3-1984_CCv0001.pdf February 1, 1984
Mr. John Holmes
City Manager
City of Redlands
City Hall
30 Ca3on Street
Redlands, CA 92373
Dear John:
Pursuant to our several meetings over the last few months with
you and your staff, and per the request of Vice-Mayor Johnson,
Councilman Larsen, and yourself made after our meeting of
January 16, we are pleased to submit this proposal to analyze
the City's costs and revenues from fee-financed services and,
as a result thereof, to design a Cost-Effectiveness Management
System and to provide other financial systems analysis, design
and installation services for the City.
You will note from perusal of the Proposal that our approach to
governmental financial management is unique both as to
technique and application. Our System will permit the City to
operate itself in a more businesslike manner and, in the
process, be free of fluctuating State and Federal revenues and
have an organized way to balance revenues with service
demands.
The other elements proposed herein as requested will provide a
budget and accounting system and a financial services process
designed to provide both City Council and staff with meaningful
and accurate data upon which policy can be based and management
decisions made.
More importantly, our basic costing System assures a
considerble measure of fairness and equity for taxpayers in the
payment for City services by those who most use those
services.
Our System is unique and copyrighted, thus we have been
selected as a sole source supplier by all cities we have served
and are serving due to the copyrighting of all our forms, text,
reports, and computer software. At the end of our work we
provide the City with appropriate perpetual licenses to our
System, as outlined in the proposal .
Adoption by the City Council, followed by a letter of
acceptance of this proposal is all we need for our purposes, or
e would execute a formal contract should you so desire.
We
look forward to being of assistance to you and the City
Council in assuring the financial viability of your services
E
and financing base, and to seek ways to serve most economically
and to finance most fairly the City services enjoyed by the
residents, business persons and organizations in the City.
Sin +erely
DOUGLAS W. A'YRES
President
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City of Redlands Proposal - Page 1
R 0)P"C3:3.Eli.L.
Services to Be Provided
Attachment A, following, graphically prevents those services
which MSI offers as part of its Financial Systems Program. You
have expressed a desire for us to prepare for the City those
marked as Components 1, 2 , S, 4, 5, 6 and 7. The others could
be available to the City after completion of the seven outlined
Components.
Summary of Proposal
Management Services Institute (MSI) proposes to provide a
series of financial analysis, systems design and installation
services, comprised of six Components, as follows:
1. Business-type revenue/cost analysis and system,
comprising the MSI-copyrighted Cost-Effectiveness
Management System.
2. A Long-Range Financial Plan, analyzing the City's
revenues, operating and capital obligations and
projecting those by means of a microcomputer model
into a ten year Financial Plan.
S. Providing the City with a microcomputer, programs,
program licenses, staff instruction, and data to
maintain Components 1 and 2, above.
4. Review of the City's finance organizational structure,
forms, procedures and controls, and making specific
recommendations and suggestions regarding those
subjects.
5. Review of and, if appropriate, design of a new fund
structure and comprehensive chart of accounts.
6. Design of a new budget system to accomodate Components
1 through 5, above, and prevision of forms, staff
instruction, and technical assistance in the
installation of the system.
7 . Provide written reports at appropriate times in the
process, basically as part of or at the completion of
each of the above six Components.
Each of the above Components is described in the following
detailed Proposal .
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City of Redlands Proposal - Page 2
MANAGEMENT SERVICES INSTITUTE
Financial Systems Components
#5
ACCOUNTING COMPUTERIZATION
SYSTEM REVISION ASSISTANCE
ASSISTANCE
#7
FMC 744 GENERAL
COST ALLOCATION FINANCING
PLAN COMMENTARY
#4 #6
COMPONENT #1
FORMS AND BUDGET FORMS
PROCEDURE REVENUE/COST CENTER AND
REVISIONS ANALYSIS SYSTEM
#2 #4
LONG RANGE ORGANIZATIONAL
FINANCIAL ANALYSIS
PLAN
PROPOSITION 4 PROPOSITION 4
LIMIT PROSPECTUS MARGIN
COMPUTATION STATEMENT
1#3
Microcomputer Data
and
Programs
City of Redlands Proposal - Page 3
Revenue/Coat Analysis - Component I
Revenue/Cost Analysis - Component I
As the core of the MSI work, upon which all other Components
are based, Management Services Institute proposes to develop a
business-type costing system for the City such that the full
costs of all fee-financed or fee-financable services are known
and quantified. Service centers will be identified for all
fee-financed or financable services, specific revenues will be
matched to those specific service centers, and revenue and full
costing information will be provided to City management, the
City Council, and designated service center managers.
Costs will be defined pursuant to the terms and intent of the
authors of Proposition 4 (now California Constitution Article
XIIIB) . All such defined costs will be identified and reported
so that cost control can be improved significantly. Another
result will be specific identification of beneficiariaa of
services not received or desired by the entire public so that
service fees and charges can be set equitably, tax subsidies
known and limited or eliminated, if desired, and California
Constitutional provisions and rate-limiting legislation
complied with.
This process results in what we call a "Coat-Effectiveness
Management System. "
What is a Cost-Effectiveness Management System (CEMS) ? The MSI
copyrighted LEMS is an analysis of revenues and costs for
specific functions or "service centers. " The System applies
private business costing and management principles and
practices to specific local government services. Revenues and
full costs for each such center are identified and compared.
The basic principle involved is the identification and
recognition of full costs following the Constitutionally
intended business definitions, not gust those costs which are
budgeted. Costs include, among ethers, salaries, full fringe
benefits, central ,service expenses, supplies, building
occupancy and equipment charges, departmental and general
overhead, and fixed asset charges.
Revenues and such coats when identified are then compared to
determine if the fees collected cover the cost of providing the
service, or if the general taxpayer is unwittingly and probably
unwillingly subsidizing the service with their City tax meanies,
by making up the difference between fees collected and full.
costs incurred.
Results of Application of a CEMS. Attachment B, following,
provides an example of one of several summaries included in a
recently completed report for another City . In this example
some 69 specific services were analyzed and this summary shows
the coast for that particular City to deliver each unit of
City of Redlands Proposal - Page 4
service and the average revenue received for each transaction.
In broader terms, the total cost to that City to deliver these
69 services neared X15 million, for which less than $9 million
in offsetting revenue was collected.
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City of Redlands Proposal - Page 5
CITY OF SAMPLE
Sart' of Revenues, Costs and Subsidies by Service unit
Fiscal Year 1983-1964 Budget
MS1 Service Unit Subsidy
CE COM ilrsit lin. cost (profit)
Per Revenue Per unit Per ionit
5- 1 Building Pian t�ererit �`�""�' -....�.,...... _.. .$46L31 $4a 65 .»_,... ,
5- 2 Building ion it 294
- inspection t ,33x5, 7
dl
S- 5 Z FP.'llan Arra Review Aplica ion, 8 $$4i.� 63 (:43
S- 4 am .61 t$11.7Lt
bfift �Iication 3.31)
Ste- 7 PS iv cif Application 15 $4X+."SL2576 { )
S- 8 it lanned ft�eibpap* ReviewVI&so
li Application 120 91 45
Application 35 $52+4.29 S62L57 $108.28
S- 9 Zone Wrince Review
Application 26 ` 88 45 $8.45
S-11 Misc.xng AppealsPl Planning Services �lzci,ion $ 32 X77.86 052.06
5-12 Design wee Plan X58 Us.* $13.25 SM 67 M39 $58.25
99
5-13 Street Per til
5-14 Development Plan 75 $250.* $25.28 $&a
S-15 !fisc. services Request 285 UL $19.38 ,
5-15 Encineertng Pisa 15 e0 L 20 t 8d}
5-17 Antsal' License 3,500 $11.43x.69 $25.26
9-18 Hicycle ion Li 100 s2.* 31.53
19 Oyfrni t.�t t Street ng Permit 7,958' $4 .44 $20.85 ($34.59)
t Case 31-2a
$10.02 $22.35 $2.33
S-el Traffic 83d*0aant Citation 29,058 $15.69 SX78 $17.89
S-23 TowingS-a Accident Service letit t Rion �uest 11W VLU %L 73
13.73
S-24 Ting in$ Card X1 .69 :18.69
', Special V. �#
#y - 1,600 $11.25 $31.79 $19.54
S-26 Awl rite Call 2,800 "133 UV.64 $123.71
S-27 Lot Cl in, tic Lot 834' &95 $149.2''9' $70.34
St. ftndated Firs i ions Inspection 35 #375.35
S- 9 Fire lacl a nt Investigation Investigation 70 WN $212.$6 $172.86
S-331 Fire Slur► "lest ral PTest e t 125 Wo. S154.28 $154.28
Special Fire
68 ULU 68
S-32 Nalizent Fire fies;*W/Hour NA NA
S-33 BoiA Artarn erc �
S-323 SL23
4 Library Rictocopy Library lService Par, 45,0S0 '` $$6.a $6 Q {38.81}
Rental 55 9-36 Recreationg swigging Swis $10.91 $18.16 $7.25
$47 Sainting Inst strsants it 24,750 %16 33.58 32.65
S-38 Private; of pools � $17. 8 :30.63
S-39 ati ilt al Figur $17.78 .7T #22'..93
5-48 Caeeeunir $8.33 .95 9450.62
5-41 commi Plot al Plot 2,500 $1.28 x.63 $4.35
5.42 Part Facility Rental, Houe we $as . $275 U..S $
34
Adult Education
al 1Teas , $i�U $1.3.23 $13.23
244 Q91.67 si21.ae $319.33S-45 Adult Baslatball 0X18 L77 2.S- 6 s ma 4 E sPa�ici s 4,75 0 $2376
S-47 Senior citinn Services Participants SL12
5 49 i enta
9-46 1 a litiies SprvReft" i Svc. Resp Custover ' 27 o $7.93 $7.993
water service
oder` 15,790 $167.35 $I1.67 $64.32
S-51 Vater TService 'Turn Off/an 185 f&41 QC34 $6.13
S-52 NOW iia Fire Unes Pequest +40 S1,125L08 SM.73 ($919.27)
6Sc+lf Course, .
2411 ,790 $ 05 14.63 si$&52 53.47
Parking . Operation,Lot parking 1;217 81 4.78 $163.89
S-5�" S 1.4�t 4 ' its Pawl 25,72 $179.19
7.3 $$39.53
r al10 $ii N . $20.86
utility SidUsage ewalk St' Miles
94A Curb tai Sim Si Project � ��$17.18 {35.I21
5 $1, S1 $1,180.06 9$412.tg)
S-64 Street SON* Curb et Banner Installation installation 28 :0.00 $169.75 $169.75
*
aft * $11#43.74 $677.74
Alley ai miles is
18 00 39 36,875.39
covaircial Building Rental So. Footage 11ULU $11.05 {fel.
7 Sale of Printed Material haelTransaction NA 14 NAA NA
5-59 Business lat.on Aoalication 278 $L0@ $194.74 $194.744
Cat $L53 V.73
City of Redlands Proposal - Page 6
The System, identifies all cost elements so that city managers
can act decisively to control all costs. And be able to provide
City Council with meangingf ul policy alternatives due to the
availability of specific cost data relating to the provision of
a specific service.
As importantly, such comprehensive and detailed data permits a
City Council to make meaningful policy decisions concerning the
degree of tax subsidy, if any, to be provided for each .service.
The potential exists for the City given in the example to
significantly enhance the quality of its services by raising
nearly $6 million in annual revenues outside any tax, revenue,
or spending limitations, should its City Council so desire.
The MSI copyrighted business-oriented full costing approach
produces similar data for each city analyzed which is
customized to the size and variety of services provided by
each.
Constitutional Beads for the System. In 1978, with the passage
of Proposition 13, California taxpayers issued a mandate for
lower taxes. Seventeen months later California citizens passed
the "Gann Initiative", Proposition 4 of the special November
1979 election, which further addressed taxes by placing a
computed "lid" on the appropriation of taxes.
The Management Services Institute methodology was developed
pursuant to the requirements of that Proposition 4, relative to
determining full "coats reasonably borne" incurred in providing
governmental fee-financed services. In other words, there is
now a Constitutional mandate for local government to be
conscious of whet it costs to provide specific services, and
whether those services are being supported by taxes, fees or a
combination of both.
The value of the MSI Component 1 Revenue/Cost analysis and CEMS
Report and System is that a business-type methodology is
.applied consistently to all City services which permits
comparison among City services and also to similar services
provided by the private sector.
MSI uses the definitions of "costs reasonably borne" set out by
the authors of Proposition 4 in their Constitutional intent
documents. Those authors represented the California Taxpayers
Association, the California Chamber of Commerce, the California
Association of Realtors, the National Tax Limitation Committee,
and the: "Spirit of 13, Inc. " movement of Paul Gann. Their
definitions are those used by businesses. Thus the requirement
to apply business principles and practices to government.
Other Factors in the MSI Cost/Revenue Analysis. Some City
services are market vulnerable and not all costs can be
recovered even if a fee can be charged. Factors taken into
consideration and derived from the MSI System are:
City of Redlands Proposal - page 7
1 . Marketability of the service.
2. Potential for increasing participation in use of and
payment for the service.
3. Potential for decreasing costs once costs are known.
4. Potential for increasing revenue.
5. Potential for increasing effectiveness of staffing.
6. Allocation of building space.
7. Ability of users to pay.
8. Possibility of a service provider other than the City.
9. Overall priority against other services.
10. Allocation of staff time to specific services.
The methodology can be extended from fee-financed to
tax-financed services so as to assure that neither group is
unfairly or inappropriately subsidizing the other. Except for
general and departmental overhead, equipment, building
occupancy, and employee fringe benefit rates, identification
and direct cost coverage of specific tax-financed services is
not encompassed within this current Proposal . Such could be
done in subsequent years by extension of the MSI-copyrighted
methodology.
Elements of Component 1 . In this key central Component we
perform the following:
1 . Conduct a one day seminar for City executives, management,
supervisory and finance staff regarding the business
philosophy, legal base, and operational aspects of the MSI
costing system, providing a detailed explanation of the
steps to be followed and the role of City staff.
2. Research and document each current City non-tax fee and
charge, for each City fund.
3. Compile a six year revenue history for each such source .
4 . Develop a tentative list of fee-financed service centers
and circulate the list to City staff to. aacertain that
revenue, cost and unit work statistics can be secured from
them if not centrally available.
. Revise the service center list based on City supervisory
staff input.
G . Chart each current non-tax revenue source for the six
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City of Redlands Proposal - Page 8
years, both for budgeted and actual amounts.
7. Analyze the City's non-tax revenue/fee structure and
historical trends. This work is compiled using the
MSI-copyrighted "Revenue Data Worksheet for Fees and
Charges", attached in Appendix A.
8 . By utilizing existing City records if adequate and
complete, and/or by supervising an internal City process
carried out by City staff, develop appropriate capital
asset expense (depreciation) schedules for distribution to
the several service centers. The MSI-copyrighted fixed
asset "Inventory" and "Fixed Asset Expense Calculation•
worksheets are utilized for this process. A copy of both
are included in Appendix A.
For each user fee or .service charge revenue source we prepare
our MSI-copyrighted "Cost Data Worksheet. " We utilize our
"Personnel Cost Allocation Sheet" and our "Program Cost
Allocation Sheet", copies of which are attached in Appendix A
herein.
in this process we perform the following steps to complete
Component 1 :
9. Determine the City organizational unit performing each
service and prepare a "Cost Data Worksheet" for each
defined fee-financed service center.
10. Analyze the relationship between the service, the fee
charged, and the user/service beneficiary .
11 . Working with City personnel, determine the unit of measure
for the service provided through the service center, and
the number of units provided the last fiscal year and
projected for the current fiscal year.
13. Determine direct costs of providing the service.
13 . Analyze the City's accounting records and budget, and
determine the indirect costs of providing services, and
develop appropriate standard formulas for distributing
each major ,such indirect cost to the several ,service
centers, which formula may be consistently applied
year-to-year.
14 . Redistribute appropriate indirect costs to the service
centers by use of the Cost Data Worksheet.
15. Develop a City general overhead rate.
16. Develop City departmental overread rates. The overread
rates developed and documented through Steps 15 and 16 can
be used for all City internal , interfund, utility and
enterprise, special assessament, and external billing,
City of Redlands Proposal - Page 9
assessment, and charging or costing processes. Such rates
are used throughout the MSI work performed in the next
Step 17.
17. Apply general and departmental overhead rates to the
service centers.
18. Alert City staff as to variables for Fiscal Years
1978-1979 through the current Fiscal Year. Such is
,necessary due to the establishment by Constitution Article
XIII3 of Fiscal Year 1978-1979 as the legal "base year"
for government appropriations.
19. Compute costs, revenues, excess revenues or excess costs,
both in gross terms and by number of service units
established by Step 11 , for each regulatory license, user
fee or service charge source of revenue. Certain legally
permissible groupings, or separations, may be made or may
be necessary to be made in this process.
Result. The MSI-copyrighted process,, outlined above as
Component 1, will determine fair, equitable, legally proper and
consistent relationships between City operations and funds.
From the service center data comes the ability to know,
control, and manage costs matched for the most part to revenues
received for the specific services provided by each service
center.
The result is a businesslike approach to costs and the ability
of City management personnel to become cost-effective
systematically. As important, the City Council also is aware of
any discrepancies between fees paid and services rendered for
any of the service centers, thereby being able to both make
policy as to the use of tax monies, and to judge
cost-effectiveness.
California Constitution Article XIIIB (Proposition 4) went into
effect on July 1, 1980, which article effectively required
proper documentation and delineation of the true and full cost
relationships between City functions and revenues. Government
Code Sections 54990 through 54993 also limit to "costs
reasonably borne" and "reasonable cost" certain fees and
charges. Our work will provide the basis for accomplishing this
end.
Unique Approach and Product. Management Services Institute has
been quite successful and believes it has its costing process
perfected, both analytically as well as from policy making and
public acceptance standpoints. Our work is unique. No other
firm is or can do anything close to that which we are doing.
Our process is both internal and extensive; and external for
revenue purposes.
Our documentation is extensive and all non-computer work
products and work papers are turned over to the City at the end
City of Redlands Proposal - Page 10
of the process. All computer programs and computerized data
also are available for a modest extra cost, as set out later
herein as Component 3.
Report. A Report would be provided at the completion of the
work of each. Component. This Report portion of Component 7
would be based on our by now intimate knowledge of the City' s
revenue, accounting, reporting and management control systems,
derived from the work entailed in Component 1 . In this portion
of this Component we would do the following.
1 . Prepare a Report appraising the strengths, weaknesses, and
potential alleviatory measures for financing of the City' s
fee-financed services. The Report provides extensive
financial, accounting, legal , and practical explanation of
the work product, the process used in arriving at it, and
the results.
2 . Make recommendations as to steps that should be taken to
enhance financial information to management and the City
Council, increase revenues, and decrease or better control
coats.
3 . Identify and suggest revenue sources which may be unused
or better used, but which are available.
4 . Present the Report to staff, and to the City Council .
5. Prepare a suggested implementing model ordinance in draft
form.
Background of Services to Be Provided as Component 2. Most of
the work done in Component 1 is now necessary in California to
comply fully with Proposition 4 (Article XIIIB) . But more
importantly, these steps and procedures are necessary to
develop and maintain a realistic municipal financial system
following business concepts and procedures. And to assure a
reasonable degree of fairness and equity in the tax .system .
The MSI System would orient the City in those businesslike
directions quite strongly. Such are the underlying dictates of
Proposition 4, and a result of the revenue-cost squeeze forced
by Proposition 13 and the double-digit inflation rate of the
last decade.
The purview of the MSI work, and of our Revenue/Cost study and
Component 1 Report would be the financial structure of the
City, including all its utilities and enterprises, and the
revenues, expenses, and costing systems for all fee-financed or
fee-financable City services. Our goal is to assure the City's
present and future financial viability, its capability to
deliver services and to utilize .its financial resources both
wisely and in a responsible, fair and economical way. In other
words, to get the most for the revenue dollar and to best
utilize monies now and in the future, wherever possible, by
City of Redlands Proposal - Page 11
having the beat possible financial and management information.
In addition, we will suggest in this Report revenue sources and
alternative ways with which City services and capital
improvement projects could be financed. Such could be the next
step in the City's financial planning process with which to
adjust to the changed revenue mix caused by the Federal and
State governments withdrawing financial sources from cities.
Alternatives are available to the City, provided they are
planned for and all costs are considered. These planning
suggestion$ would be included in this portion of our Component
7 Report.
Long Range Financial Plan - Component 2
This Component will use the data base developed for Component 1
for the City's revenues and costs, supplmented by tax revenue
and tax-financed services data, and a process involving staff
with which to project operational and capital needs.
Steps in Plan Development. In developing the Long Range
Financial Plan MSI staff performs the following distinct
steps.*
1 . Project each tax and non-tax revenue source for each of
the next ten years.
2 . Catalog the specific assumptions upon which revenue
projections are made, including development phasing.
3 . Make a regression analysis of revenues for the past
five years, and utilize that analysis as the basis for
one projection of revenues.
4. Develop a questionnaire for completion by all
department and division heads on which to project
operating costs in some detail , for each of the next
ten years.
5. Interview department and division heads to assure
completeness, accuracy, and reasonableness of such
operating cost projections.
6. By utilizing the fixed asset data compiled in the
Revenue/Cost Analysis Report prepared by MSI, and by
the questionnnaire and interview process involving
department and division heads, project fixed asset
replacement and capital needs for the next ten years.
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7 . Prepare and present a Report containing projections of
revenues, expenses, fixed asset charges, and deficits
and surpluses, by fund and utility, for each of the
next ten years. Also provided in the Report would be
appropriate tables, charts and graphs of various
alternatives and supporting data, with recommendations
City of Redlands Proposal - Page 12
of specific steps to take to avoid potential financial
difficulties which might be discovered and projected.
8. Turn over all workpapera, documents, interim work
products, and source documents to the City. A perpetual
license to the MSI-developed financial plan program
also would be provided, as would the data, disks, and
program, and program license, provided Component 3 is
accepted.
Microcomputer Data and Programs - Component. 3
Due to the volume and complexity of data developed and utilized
in our Cost-Effectiveness Management System analysis, we
utilize a microcomputer from the initiation of work, placing
all data into the micro. In this Component at the end of
Components 1 and 2 we would turn over to the City the
microcomputer, all the City's data on disks, a printer, the
software programs, and a perpetual license for their use.
Additionally four days of instruction would be provided to
selected City staff.
This Component would enable City staff to maintain a constantly
updated version of our Component 1 and 2 work products, thereby
eliminating the need for an annual maintenance contract, or an
elaborate and expensive cost accounting system, unless
otherwise desired for day-to-day management purposes.
Hardware. The hardware is a Compaq portable 256K microcomputer
with two 320K floppy disk drives, all the City' s data on disks,
and a Gemini 10 dot matrix printer .
The Compaq is a portable which is an IBM/PC run alike,
operating on the MS/DOS system of the IBM/PC. Thus all IBM/PC
CP/M and MS/?DOS compatible software will run on the Compaq .
Software. Both of the Revenue/Cost and Long Range Financial
Plan microcomputer programs are based on a menu-driven spread
sheet process, with string computation formulas, both which we
have developed, based on the Lotus 1-2-3 program.
The Lotus 1-2-3 program has been utilized as the base, but
modified heavily by MSI in the development of the Financial
Plan program. The net result is a dynamic financial model , in
which any one or more figures can be changed and a temporary .or
a permanent "what if" projection made of all or any part of the
City's financial condition, or prospective condition. Thus the
Financial Plan is capable of being constantly revised and/or
updated to recognize changing circumstances or decisions. Thus
policy options can be analyzed prior to being made. In effect,
an entire new Financial Plan can be created at will, as often
as desired.
The data for both the Revenue/Cost analysis and the Financial
Plan would be of limited utility unless this microcomputer
City of Redlands Proposal - Page 13
purchase Component is accepted.
Organization, Forma and Procedures Review - Component 4
In this Component we would review the City's finance
organizational structure and the processes, systems, forma and
procedures utilized by the personnel in that organization. The
following steps would be accomplished:
1. Interview each of the City Council members, City
Manager's staff, and department heads regarding their
needs for data to be produced by the City's financial
structure.
2. Review all forms, procedures and processes used in the
City's revenue receipt, payroll , encumbrance and
disbursement, investment, fixed asset, financial
reporting, and other financial functions.
3. Review all systems and procedures as to work flow,
general financial integrity, systems capabilities and
relative effeciency and effectiveness.
4. Identify major problems, identify potential solutions
and the timing of solutions to those problems.
5. Write a Preliminary Report presenting the findings,
recommendations and specific prioritization of problem
resolution for items 1 through 4 .
6. Meet with appropriate City personnel to review the
preliminary findings, and discuss and explain the
Report to them.
7 . Prepare and present a Final Report of findings and
recommendations, with specific proposals for
implementation of those recommendations.
Chart of Accounts - Component 5
In this Component MSI staff would perform the following:
1 . Review and appraise the reporting needs and desires of
the City Council, City Manager and department heads.
2. Review and _ appraise the adequacy of the existing
system in meeting those needs determined in Step 1 .
3. Review and determine tghe adequacy of the present
accounting system to provide adequate data to
institutionalize the costing system which MSI would
have developed as Component 1 , .and the Long Range
Financial Flan developed as Component 2.
4. Review the present fund structure, and revenue,
City of Redlands Proposal - Page 14
budgetary and general ledger charts of accounts for
simplicity, adequacy, accuracy of reporting, and
compliance with the State Controller's requirements.
5. Prepare a proposed new budgetary chart of accounts,
fund structure, revenue chart of accounts, and
appropriate general ledger accounts.
6. Review those items prepared in step 5 with the City
Manager and Finance Director and make the appropriate
necessary and desired revisions.
7. Prepare a final consolidated chart of accounts, with
appropriate written descriptions where necessary, in a
short written Report suitable for presentation to the
City Council and for instructional use by City staff.
8. Conduct two half-day in-service training workshops for
City staff.
Budget System - Component 6
In this Component Management Services Institute staff would
provide the following services:
1 . Appraise the City's existing budget format, system and
process for adequacy of policy making data,
accountability, accuracy of accounting and reporting,
and ease of understanding by the City Council and
public.
2. Propose a program structure and appropriate chart of
program accounts.
3. Based on steps 1 and 2 develop new budget formats and
forms, and provide the City with the forms in some
quantity, sufficient with which to prepare the 1385-86
budget.
4 . Assist in the instruction of City staff on the use of
the new forms, chart of account: and procedures,
through two half-day in-house training sessions.
5. Assist in the presentation and explanation of the new
budget forms and format, and chart of accounts to the
City Council .
6. Coordinate utili^ation of the forms with
implementation of the new chart of .accounts, assisting
City staff with transition problems, definition
revisions and clarifications.
Reports - Component 7
Each Component would contain at least one Report explaining
City of Redlands Proposal - Page 15
what was done, presenting work products, and a basic
explanation of methodology, findings, recommendations,
suggestions, and constructive comments, as well as
implementation advice. As stated in the preceding Component
explanation sections, some Components would contain multiple
Reports.
Staff Liaison Committee. During all the work of all Components
we request City management to create a three-member Liaison
Committee of City staff to monitor and coordinate our work, and
to receive training in the steps we take and in the System .
Such is part of the normal process, for which there is no extra
charge. All our work processes, techniques, forms and systems,
and insights of experience are explained in excruciating detail
and the Liaison Committee trained in the use of the forms and
System such that they can maintain it in-house.
Timing of ' Services
The following Schedule sheets on the next pages present the
timetable for the services proposed.
The work of Component 1 would be initiated in late February and
continue steadily through submission of the Report for that
Component in November of 1984.
Since this Component is key and basic, any slippage of decision
delaying project initiation past March 1 would cause our
schedule to slip commensurately and may require a
re-examination of the length of the time frame to insure that
no additional MSI project obligations have been incurred which
might affect the proposed project timing.
Management services Institute
SCHEDULE AND SUMMARY OF ACTIONS
ACTIONS BELOW CORRESPOND TO THE WEEKS BEGINNING
February 19$4 7
March 5 1 1 26
April 2 9 1623 30
IEGENO 1 7142128
SON Work m Progress June 4 11181251
* Submission of a Report ly 2 9 6 23 30
6 130
C�ENP 1: FEE-FIPWXED SERVICES
1. Conduct seminar
2. Research x)n-tax revenues
3. Comrsile revenue history
4. Developservice center list
S. Revise service center list
6. Chart non-tax sources
7. Analyze fee structure
S. Develop fixed asset expenses
9. Determine units performing services
10. Analyze relationships-
11.
elationshi s11. Determine units of service
12. Determine direct costs
13. Determine indirect costsTF
I #
14. Redistribute indirect costs
15. o general overhead rates
17. A trlrates-
la, Alert is m
v
revenues19. Cmmute costs and I
- p
1
Precara Report
2. .,Take soecif i.c reccamndations
3. Suaqg5t revenue sources
j
4. ?resent5. Preogre Re rt !
7 f
dinance
NE `s 2: FINANCIAL PLAN ! I
1. ?ro'ect revenues
2. -atalca ass' t1LJITS
f
3. `Fake revenue regression anal=rats
4. ^ vel caestionmire
S. Interview department heads I
6. ?ro'ect capital needs
7. "repave oro ecticns and Report
Turn giver work e I i i I i I
1520 c„.
Management Services Institute _'y �,s p="{w:r'Ja eP-rzpGsa= - Page 17
SCHEDULE AND SUMMARY OF ACTIONS
ACTIONS BELOW CORRESPOND TO THE WEEKS BEGINNING
ENovember
2
3 101. 24
1 81152229
5 21 2LECEND■OW work in RrogreSS3 #� 7 4 1 7 1421 8
5ubrnission of a Report 411118
CC6UKMTr 1: FEE-FINANCE? SERVIC MS
1. Conduct Seminar
2. Research non--tax revenues
3. Comile revenue history
4. Develop service center list
5. Revise service center list
6. Chart non-tax sources
' Analyze fee structure
S. Develop fixed asset expenses
9. Determine units performing services
10. Analyze relationships
11. Determine units of service
12. Determine direct costs
13. Determine indirect costs
14, Redistribute indirect costsI
15,
Develm ceneral overhead rates
17. Ar_,plyoverhead rates
1 i f
1., AIL4MYSTS AND BF.2=
2.
1 j i � ESI
p f
,Make soecif is recam endations E
3. Zugag-s ==mk, sources [gig
4. Present 3grort
Zrjt�ara draft ordinance
3 E i I I
cr 1. i E #
r € 1 i
-a tnt a c
[ mi 5. �3 F�x C
f z,�Laital needs
7 e
1,irn over r
7 520 �
Management services Institute
SCHEDULE AND SUMMARY OF ACTIONS
ACTIONS BELOW CORRESPOND TO THE WEEKS BEGINNING
fugust
3
May 142128
June 4 11 1A ITS
LEGEND 2 23 3C
■■N work in Progress Submission of a Report 61132027
1724
1 815 22
1. Turn over equipffent
' Train Cit,7 staff
C AVENT 4: OF?GANIZ'N, F & PROC.
1. Interview i and Staff
2 Review forms and procedures
3. Review work flow
4. Identifv Problems and solutions
5. write Preliminar= Report
£
6. Review Report
7. Write and present Final Report
Ca",T 7t� 5: CRAP;.' DF ACCOUNTS
I. Review needs
2. iw adequacy
1
Review4.
PrpnAr- 1-hart nf ACCpMtS j
6. RevJ2�d with C'
Drenare final Chart- of Accounts
fi 1
x�prAjse =_irr-nt mrstemt
3. Oevslcz new, budget f4. :rustruct �:ity staff
i t
� £ t
i
f^t 'n j,=1ementatign
(See --act ent) j
1520
SAM
Management Services Institute
SCHEDULE AND SUMMARY OF ACTIONS
ACTIONS BELOW CORRESPOND TO THE WEEKS BEGINNING
984 2
December 3 110117 24 31
JanUary 19a 1711461 28 11
LEGEND FebrLiary 4 11 11-IS
OWN work in ProgreSS -MarCb 4 LL 2S
IS Submission of a Rewt ril I S L5 22 29
6 13 0
CCtTCNENT 3: MICfCCaMPIUM
I. Turn over equignent
2. Train City, staff lom I ml of
CC TENT 4: ORGANIVN, FORMS & PRCC.
1. interview C=til and staff
2. Review forms and procedures
3. Review work flow
4 Identify oroblems and Solutions
5. write Preliminary Report
6. Review Report
7. write and present Final Re rt
CMICI TENT 5. CHART OF ACCCL.fi M
1. Review needs
1
. 2. Review adeauacy
—I- Rpuipw ir-nnunting =t-em
4 I
P ,
6- Review wif-h ('ity Mgr & Finance Dir
. 7Prpparp final C e
IBM
4 f
r
* Y !
3 ff
rt :Zitz4 stafflogo Ampgain prpsan*atim, #
All
I z
2M=
i
7 I i 1 f
152tl
City of Redlands Proposal - Page 20
Schedule Summary. As can be seen from the preceding Schedule
sheets, the several Components would be started, conducted, and
completed as follows:
_9QM2QG§Ut_ -Start- _99M219ta__
1 . Revenue/Cost <CEMS) February 1984 November 1984
2. Long Range Plan September 1984 January 1985
3. Microcomputer December 1984 February 1985
4. Org'n, Forms & Pro. April 1984 October 1984
5. Chart of Accounts October 1984 January 1985
6. Budget System November 1984 June 1985
7. Reports per requirements of each Component
Fee for Services
The fee for our services for the quoted Components is the
following:
__92M22atnt Fee
1 . Revenue/Cost (CEMS) . . . . . . . . . . . . . . . . . . . . s 65,000
2. Long Range Plan . . . . . . . . . . . . . . . . . . . . . . . 20,000
3. Microcomputer & Programs . . . . . . . . . . . . . . 15,000
4. Organization, Forms & Procedures . . . . . . 15,000
5 . Chart of Accounts . . . . . . . . . . . . . . . . . . . . . 10,000
6. Budget System . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
7. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . included
This fee covers all costs except any required business license,
and report reproduction, which we will have printed in the
number you determine, with our actual coats to be billed to the
City, which costa would be added to the contract price. In t'.1i-Is
way the City will control the volume and cost of Report
reproduction, and distribution.
We will submit 16 monthly invoices of $8,437.50 each, with the
first being submitted ten days after notice to proceed. Each
would be due within 20 days of submission. Subsequent invoices
would be submitted each month following.
City of Redlands Proposal - Page 21
These prices and the Proposal are good for 60 days, or until
April 3, 1984.
We have found it both desirable and more economical for the
City if it provides us with some sort of reasonably suitable
work space within City Mall , telephone, minor incidental
clerical, typing and reproduction service. These can be easily
absorbed within existing resources and would be utilized only
modestly.
While much of our work would be conducted actually in the City,
significant parts of it involving microcomputer data input,
"number crunching" , and accounting analysis do not require our
presence. During those times we would, of course, be available
by telephone as and if necessary.
Assurances
We always give assurances that our Component 1 Report would
provide specific recommendations upon which the City Council
could be reasonably expected to take positive action, which
actions would generate sufficient added revenue and/or
cost-effectiveness savings so as to offset our fee within not
more than: six months. Based on our rather considerable
experience in other cities, we have every reasonable
expectation to provide a more equitable balance between cost
and effectiveness of services provided to certain beneficiary
groups and the fees and charges made for those services to
those beneficiaries. Further, any such additional revenues
which might be gained would be continuing and cumulative,
whereas our fee is one-time only.
We would invite you to inquire of our other client cities as to
results and the level of acceptability achieved. They are
listed below.
Perhaps more important than any potential revenue adjustments,
however, is the fact that our work will result in the City
staff and, in turn, the City Council having full cost
information available upon which to make policy decisions as to
priorities for spending available revenues among numerous
competing laudable public programs and pr03ects which exist .and
are proposed.
And, a budgeting, accounting, and Fiscal control system
adequate to make the System and its advantages continuing
ones.
I
Project Staff
Our professional qualifications are enclosed .
Douglas W. Ayres personally would be in charge of the project
.and would directly oversee the work. A . R. "Rick" Kermer, our
CPA Dice president, personally would oversee and accomplish the
City of Redlands proposal - Page 22
technical accounting work, while Owen Olsen, CPA, would assist
on the indirect cost distribution analysis processes. Lee
Weber, Vice President, would participate in the direct cost
analysis interviews and cost-finding process. Other staff would
be assigned as appropriate.
You will see from perusal of our professional qualifications
that both Mr . Kermer and Mr. Ayres have been City Finance
Directors, City Treasurers, and data processing managers;
Kermer in three cities. Ayres also has been a City Clerk.
The four MSI principals have conducted a total of more than 250
consulting engagements. Weber, Ayres, and Williams have been
city managers of seven cities among them, and Weber the initial
interim City Manager of two additional newly incorporated
cities. We also have other accountants, EDP systems analysts,
and programmers available to us, on an ae-needed basis.
Mr . Kermer co-authored the League of California Cities
publication Cost Accounting for California Cities", the manual
which is recommended as the standard to be followed by
California cities.
All four MSI principals also teach or have taught at the
graduate level and provide professional seminars on financial,
personnel, and management subjects through both the University
of Southern California and the California State University and
College System . Mr. Ayres also teaches graduate courses at the
University of California, Irvine School of Management.
City of Redlands Proposal - Page 23
References
We have completed similar projects for the following
jurisdictions and would request you to contact the following
persons for references:
Jurisdigtion.... ...R@f2rgng@---- ___-____Title_________
City of Alhambra Kevin Murphy City Manager
Mike Paulus Assistant City Manager
City of Oceanaide Suzanne Foucault City Manager
Vicky Zorkocy Assistant to City Mgr.
City of La Palma Richard Rowe City Manager
Mary O'Neill Assistant to City Mgr .
City of San Clemente George Caravalho City Manager
Dean Porter Finance Director
City of South Gate Bruce Spragg City Admin. Officer
George Wanner Finance Director
City of Rialto Art College Finance Director
Welt Pudinaki City Manager
City of Ranc4o Lauren Wasserman City Manager
Cucamonga Harry Empey Finance Director
City of Monrovia James Starbird City Manager
Jeanne Kennedy Assistant City Mgr.
City of San Juan Steve Julian City Manager
Capistrano Bob Boone Finance Director
City of Grand Seth Armatead City Manager
Terrace Myrna Erway City Clerk
City of Vista Morris Vance City Manager
Frank Rowlen Finance Director
City of Seal Beach Alan Parker City Manager
Dan Joseph Assistant City Mgr.
Cost-Conscious City Operations
You and several of the City staff are aware of Mr. Ayres'
efforts in bringing cost-consciousness to city operations and
the considerable management advantages of such . Also, you know
the ease with which the City Council can relate to their
constituents when programs, services, revenues and true costs
are known and then financial plans and projections are
City of Redlands Proposal - Page 24
developed to cope with costs, service demands and
expectations.
The Management Services Institute staff looks forward to the
possibility of being of assistance in bringing the management
advantages and the revenue fairness and equity benefits of our
System to the City, its City Council , and their constituents.
END