Presentation on theme: "ISF Workshop Presenters: Auditor – Controller / Treasurer – Tax Collector Information Technology Services General Services Risk Management Central Warehouse."— Presentation transcript:
ISF Workshop Presenters: Auditor – Controller / Treasurer – Tax Collector Information Technology Services General Services Risk Management Central Warehouse
Internal Service Funds What is an Internal Service Fund (ISF)? A governmental centralized service that provides services or products on a cost-reimbursement basis to other governmental units or external users with a break-even motive. To qualify as an ISF the predominant users of the services or products must be the government itself.
Internal Service Funds ISF vs. Central Service Department The ISF is a central service department that recovers costs via cost reimbursement as services and/or products are provided via invoicing or direct billing. The non-ISF central service department recoups costs via direct billing and via the Cost Plan (A-87) for non-billed costs for services and/or products allocated to departments based upon the level of service provided to each department.
Internal Service Funds General Methodology The Internal Service Fund accumulates all costs related to operating the ISF and allocates those costs over the number of productive units (goods or services) to be provided to determine a per unit cost of production. Total Costs/Service Units = Cost per unit
Internal Service Funds How are ISF rates calculated I. Service Level -Determine the appropriate service level necessary to meet the projected demands of user departments Example: -Number of vehicles required to meet transportation demand of user departments
Internal Service Funds How are ISF rates calculated (cont’d) II. What elements are included in the rates? A. Operational Costs - Salary and benefits of ISF Personnel - Operational Expenses – service and supplies - Allowable Indirect Costs (department) - Allowance for Replacement Costs - A-87 Costs (other central service department costs) - Working Capital / Operating Reserve – 60 day avg) B. Retained Earnings from Prior Year - Unreserved surplus or deficit from the prior year (Note: Retained Earnings reserved for a specific purpose are not included in the rates, i.e. replacement vehicles, building improvements)
Internal Service Funds How are ISF rates calculated (cont’d)
Internal Service Funds Application of ISF Rate The ISF will charge the users for their services and/or products the calculated ISF rate by either invoicing the user or preparing a journal voucher billing for the service and/or product.
Internal Service Funds Mid-Year Rate Review/Adjustment The ISF should review their current level of activity to determine if their activity level is above or below the estimates used to calculate the ISF rates. The ISF rates should be adjusted at mid-year if the activity level is materially different from the estimates.
Internal Service Funds Why adjust ISF rates at Mid-year? A. Service activity > Service Estimates The ISF will be collecting more revenue than estimated and the rates should be adjusted to reflect this additional revenue. The additional revenue should create additional net income that should be used to adjust rates downward to reflect the reduced cost of service on a per unit basis.
Internal Service Funds Why adjust rates at Mid-year? (cont’d) B. Service Activity < Service Estimates The ISF will be collecting less revenue than estimated and the rates should be adjusted to reflect this lower than anticipated revenue. The reduction in revenue should cause a net loss and rates should be adjusted upward to offset the lost revenue that reflects an increased cost of service on a per unit basis.
Why adjust rates at Mid-year? (cont’d) A. Authoritative Guidelines 1.A-87, Cost Principles for State, Local, and Indian Tribal Governments recommends that ISF rates be reviewed semi-annually and adjusted as necessary. 2.California State Controller’s Office “Handbook of Cost Plan Procedures for California Counties” states that ISF’s should prepare and examine its financial condition at least midway through each fiscal year and if a material profit or loss is projected the billing rates should be adjusted.
Internal Service Funds Why adjust rates at Mid-year? (cont’d) 3.California State Controller’s Office “Accounting Standards and Procedures for Counties” states that if the ISF’s mid-year results indicate either a substantial income or loss for the year rates should be adjusted at that time. 4.Current year rates do not reflect prior year actual “net income” or “net loss”
Internal Service Funds ISF Reserves (Fund Balance / Retained Earnings) vs. Cash A. Reserves 1. Operating Reserve Provides for 60-day cash liquidity to complete the revenue earning process from providing the service and/or product to collection of payment. 2. Designated Reserve A designation for a specific purpose of the ISF such as replacing equipment, vehicles or building remodels.
Internal Service Funds ISF Reserves (Fund Balance / Retained Earnings) vs. Cash 3. Operating Reserve = Working Capital Reserve
Internal Service Funds ISF Reserves (Fund Balance / Retained Earnings) vs. Cash B. Cash –The most liquid asset held by the ISF Does not correlate to fund balance on a 1:1 basis as fund balance can be represented by inventory, equipment, and so forth. C. Fund Balance formula Assets – Liabilities = Fund Balance
Internal Service Funds ISF Reserves (Fund Balance / Retained Earnings) vs. Cash D. ISF Loans
Internal Service Funds Considerations for using an ISF A. Transparency The rate development process should openly disclose the projected units of service and/or product to be provided with the projected expenditures (type and dollar amount) necessary to provide the service and/or product.
Internal Service Funds Considerations for using an ISF (cont’d) B. Efficient use of Resources The use of an ISF segregates financial reporting for ISF operations from the rest of the Central Service Departments that should enhance responsiveness to changes in demand.
Internal Service Funds Considerations for using an ISF (cont’d) C. Requires Long-Term Planning The ISF should consider the cost of repairing and/or replacing equipment in the development of rates. Allows the operation to plan for retirement of ISF assets.
Internal Service Funds Considerations for using an ISF (cont’d) D. Better Management and Control The development of rates provides a tool to compare ISF rates to comparable services provided by the private sector for competitive analysis. E.Aids management in identifying where operational inefficiencies may be: - inefficient output per unit of input - cost effectiveness of inputs to generate output - cost structure of inputs
Internal Service Funds Potential Limitations of using an ISF A. Lack of Flexibility The ISF may not be able to adjust rates timely to reflect changes in demand - demand nature of users (in tight budgetary times users may postpone use of services and/or products until later in the budget year thus giving a “false” demand reading at mid-year)
Internal Service Funds Potential Limitations of using an ISF (cont’d) B. User uncertainty about ISF Rates The user department is unable to estimate ISF rates from year to year for their budgeting/planning purposes as many ISF input variables are not readily available or projectable: - salary and benefits changes - ISF staffing level - reserve level - demand from other users
Internal Service Funds Potential Limitations of using an ISF (cont’d) C. Potential for “excess reserves” The management of the ISF may develop rates with an aggressive replacement/repair program but not spend the reserves in accordance with program terms thereby accumulating reserves in excess of what is required to operate the ISF. The users of the ISF would have then been overcharged for the services and/or products received.
Internal Service Funds Potential Limitation for using an ISF (cont’d) D. Lacks economy of scale The ISF may be unable to provide competitive rates as compared to the private sector due to a smaller customer base and/or product volume.
Internal Service Funds Review of ISF rates A.Auditor-Controller/Treasurer-Tax Collector (ACTTC) 1.Review the rates for reasonableness of: - input costs - output estimates - methodology used to allocate costs
Internal Service Funds Review of ISF rates (cont’d) B. Cost of review The cost of each review depends on the complexity and accuracy of the rate study prepared by the ISF. The ISF can assist with an efficient review by: 1.Preparing a thorough work document that: –states the assumptions used to allocate overhead –identifies the input costs with assumptions –identifies the projected service and/or product level with assumptions –prepares support documents that are properly cross-referenced and tickmarked –formulas in spreadsheets should be documented and easy to follow 2. Respond to questions timely
Internal Service Funds Review of ISF rates (cont’d) C. ACTTC vs. External Auditor 1.Review Process The review process will be essentially the same as the cost accounting principles that underlie rate development are standardized 2.Cost Effectiveness The cost effectiveness will depend upon: a. experience of reviewer b. cost structure of reviewer’s entity c. adequacy of the ISF work documents
ISF Workshop Information Technology Services Department Voice CommunicationsInformation Technology ITSD Wireless (Radio Shop) PeopleSoft Operations
ITSD – Fund Composition Three separate Internal Service Funds (ISF) Four distinguishable services: –Fund 1020 – IT Services and Network Operations –Fund 1030 – PeopleSoft Operations –Fund 1080 – Telecommunications – Radio Operations (ITSD Wireless) Each fund will be presented separately
–Institutional network with secure government to government connections. –Enterprise applications – email and internet. –Secure Desktop environment. –Application hosting and database support. –Secure Data storage, backup and recovery. –Consultant services – analysis, programming, application design, technology planning and project management. –Security services and appropriate use investigations. –HIPAA security administration. ITSD – Fund 1020 Basic Services Provided
ITSD – Fund 1020 Service Metrics Service metrics for last year: 10,228 calls for PC support 436 printers repaired 7,938 Security requests Completed HIPAA, Medi-Cal and CERTNA audits 121 PC forensic investigations completed 3,529 application support requests completed 8.2 million transactions are processed on the network each day 6,000 connections are blocked by our Firewalls each minute 5.2 million emails are processed monthly 4.5 million spam emails blocked each month 120,000 virus or malware instances were blocked each month
ITSD – Fund 1020 How are service levels determined? Service Level Agreements. Customer requests for specific services. Mandated requirements either for a single customer or countywide. Downtime avoidance. Risk avoidance. Technology driven changes. Ability of the customer to fund services.
ITSD – Fund 1020 Types of Costs Rate Recovered Costs (89%): –Those costs specific to the production of a service or function which can be purchased by a customer. Direct Costs (11%): –Those costs which are charged directly back to a customer. No overhead is added to direct costs. Most common direct costs are for hardware or software requested by the customer.
ITSD – Fund 1020 How are rates calculated? Cost Estimation: –Historical costs are reviewed. –New estimates are obtained where costs are not set contractually. –License levels are reviewed and adjusted based on input from customers. –Costs are accumulated in cost centers that represent specific services. –New functions or changes are estimated with a cost benefit completed for 1(+) useful life cycle.
Rate Calculation: –Costs are accumulated in Cost Centers. –Indirect costs are added to the Cost Center based on the percentage of overall cost in that Cost Center. –Resultant total cost within a Cost Center is divided by the metric associated with the service that Cost Center represents calculating the rate for that Cost Center. ITSD – Fund 1020 How are rates calculated? (cont.)
With each service is associated a cost center and a rate metric. Rate metrics are relative to the service and indicate a measure of how costs are incurred. Customers can determine how many of a rate metric they wish to purchase each month, thus providing some control of their IT costs. The simplest example is an I-Net login. ITSD – Fund 1020 What are rate metrics?
ITSD – Fund 1020 Rate Example I-Net login - $4.85 / person / month Recovers costs for 1 security position, 1 help desk position, related software and 2% of ITSD indirect costs. Costs associated with establishing and maintaining logins total $369,397 for FY 09/10. 6,348 logins times 12 months is 76,176 per year. $369,397 divided by 76,176 is $4.85 / month.
ITSD – Fund 1020 Why are historical costs used to calculate the rates? Historical costs and metrics in addition to projected costs are the basis for overall budget and cost recovery rate development. Historical costs are adjusted by changes to policy or practices, new quotes from vendors, changes in the type of services and other various influencing factors. Historical costs on their own are not a strong enough base for accurate cost recovery.
ITSD – Fund 1020 Cost Allocation to Customers Direct Costs are fully allocated to the customer without additional overhead or processing charge – pass through costs. Rated costs are allocated based on the rate metrics used by the Department. All costs are billed monthly in arrears unless it is a one time annual payment. Each month reflects the changes customers requested in the previous month.
ITSD – Fund 1020 Cost Containment Return On Investment (ROI) analysis at each acquisition / replacement milestone. Lease / Purchase to spread costs across useful life. Useful life analysis to avoid high repair costs and emergency replacement costs. Energy efficient equipment and facilities. Aggressive negotiations with software vendors. Monitor expenses and revenues closely.
ITSD – Fund 1020 Cost Containment (continued) Work closely with customers to eliminate unnecessary licenses, features. Leverage Open Source tools to replace commercial software where risk allows. Plan beyond the budgetary cycle and include long range goals that coincide with industry directions. Avoid “Bleeding Edge” technology and the “WOW Factor” – trust the numbers instead.
ITSD – Fund 1020 Overview of reserves held by ISF? Reserves for Fund 1020 as of August 12, 2009 = $5,927,031 Allocated as follows: $ 950,000 excess retained earnings. $1,300,000 designated for Data Center Infrastructure upgrades. $ 431,468 designated for replacement UPS, Data Center and 21 st Floor. $3,245,563 operating capital reserve. $5,927,031 Total Target for 60 day operating capital reserve: $3,616,438 This analysis is based on actual cash available as of August 12 th. Cash is monitored daily and depending on payments in process and relationship to billing cycle, total on hand will vary.
ITSD – Fund 1020 How are reserves managed by the ISF? Excess reserves are returned through rate reductions and any shortage in reserves are collected through rate increases. Designations should be used for major capital expenditures with the replacement cost collected over the useful life of the capital asset. Cash on hand is monitored daily to detect trends that result in negative end of year balances. Early action is imperative to offset revenue shortfalls or expense overages.
PeopleSoft Operations - Fund 1030 Basic Services Provided Operates and Maintains the enterprise wide Human Resources and Financial Management System. Human Resources system provides payroll and employee benefits support. Financial system processes all financial transactions for the County and some non-County organizations.
PeopleSoft Operations - Fund 1030 Basic Services Provided FY 09 205,238 paychecks. 890,535 Financial transactions (journal, voucher, & deposits). 7,548 employee benefit statements. Upgraded HR system from 8.9 to 9.0 Archived oldest three years of selected HR data. New self service functions (address, phone and contact info). New drill-down functionality for selected reports. Clean-up of old asset data and improved asset reporting. Implemented automated interfaces with all employees benefit providers.
PeopleSoft Operations - Fund 1030 Basic Services Provided FY 09 (cont.) Provided support for pending legal actions. Eliminated centralized printing of PeopleSoft reports. Automated distribution of financial system reports to outside entities via email. Support for the FY10 Budgeting process. Implemented automated support and reporting for mandatory and voluntary furlough, etc. Implemented a new leave plan. Improved data security for outside interfaces.
PeopleSoft Operations - Fund 1030 How are service levels determined? Meeting mandated accounting changes such as tax updates. Meeting payroll and bank deposit deadlines. Completing benefits enrollment in a timely manner. Working with Auditor, Personnel, CAO and Purchasing to meet day to day processing needs. Working with customer departments to meet a variety of their needs.
PeopleSoft Operations - Fund 1030 How are rates calculated? Rate Recovered Costs (100%): –All costs are recovered via two rates, one for Human Resources and one for Financial. –Costs are primarily labor, software and ITSD rated expenses. –Costs from ITSD are Board approved rates as provided to all customers. No other ITSD overhead is included in PeopleSoft costs.
PeopleSoft Operations - Fund 1030 How are rates calculated? Human Services Rate: Total HR costs divided by the total number of pay checks generated in the previous year. Financial Management System Rate: Total Financial costs divided by the total number of transactions (journals, vouchers and deposits) from the previous year.
PeopleSoft Operations - Fund 1030 Cost Allocation to Customers? Human Services Costs: Actual number of pay checks generated in the previous month billed in arrears. Financial Management System Rate: Actual number of transactions (journals, vouchers and deposits) processed in the previous month, billed in arrears.
PeopleSoft Operations - Fund 1030 Cost Allocation to Customers? (cont.) Organizations other than County Departments use the PeopleSoft Financial system. These agencies are billed using the same rates on paper bills. Schools and Cemetery Districts are mandated to use Fresno County Treasury. By statute we cannot charge them for their share of the cost and must carry the cost as a general fund obligation.
PeopleSoft Operations - Fund 1030 Overview of reserves held by ISF? Reserves for Fund 1030 as of August 12, 2009 = $1,099,300 Allocated as follows: $ 600,000 designated for upgrade of Financial Management System $ 499,300 operating capital reserve $1,099,300 Total Target for 60 day operating capital reserve: $ 461,000 This analysis is based on actual cash available as of August 12 th. The total cash on hand will be reduced by making two large payments for annual software licenses in the next 60 days.
Telecommunications - Fund 1080 Basic Services Provided Comprehensive voice communication system. Integrated IVR, call tree and voice mail services. Cellular phone administration. Network Fax services. Voice and Data infrastructure wiring. Voice network management. Live County Operators. Contract Management for voice related services and materials.
Telecommunications - Fund 1080 Service Metrics Administer 1,353 cell phone accounts Approx. 10,000 phone lines in 250 locations (includes emergency and alarm lines, does not include Sheriff’s Dispatch lines) Number of calls for service 2,113 Point-of Sale devices: 150 FAX machines: 927 M/A/C: 703 Number of WATS (800) Number calls 9,636 Setup for 3 Elections: phone banks (40 to 100 telephones) and 40 cell phones JJC Courthouse: 300+ telephones, MAGEC: 50+ telephones, Fowler Library Abandoned locations closed down: 10+ sites and 100+ telephones IVR Systems: 4 (CUBS, Jury, Elections & HEAT)
Telecommunications - Fund 1080 What is recovered by rates? Rate Recovered Costs (47%): –A single rate recovers labor, phone system maintenance, depreciation and all indirect costs. Direct Costs (53%): –Commercial phone bills, cellular phone costs, long distance charges and cabling costs are all charged back directly to the customer who incurred the cost. No overhead is added to direct costs.
Telecommunications - Fund 1080 How are rates calculated? Single rate is based on Equivalent Units (EU) which is an averaging process based on original cost. Original cost of the phone equipment, divided by $100 gives an equivalent unit or EU number. All rate recovered costs are divided by the total number of EU, giving the cost recovery rate. The rate is applied monthly in arrears to all phone equipment in service the previous month.
Telecommunications - Fund 1080 How can customers impact their costs? Phones can be disconnected. Phone models can be changed, single line to multi line, etc. Monitor long distance costs. Review cell phone bills. Eliminate unused or underused phones. Remind staff to use 5 digit dialing for in County calls.
Telecommunications - Fund 1080 Overview of reserves held by ISF? Reserves for Fund 1080 (voice only) as of 8/12/09 = $4,465,468 Allocated as follows: $4,531,592 Equipment depreciation. $ (66,124) Operating capital reserve. $4,465,468 Total Target for 60 day operating capital reserve: $ 687,960 This analysis is based on actual cash available as of August 12 th. The operating capital negative balance reflects the payment of $650,000 in CalNet II phone bills not yet billed back to Customers. Cash is monitored daily, total on hand will vary.
ITSD Wireless (Radio Shop) - Fund 1080 Services Provided Maintain enterprise wide microwave based radio network. Procure, configure, install and support mobile, hand held and fixed base radios. Support EMS and Sheriff Dispatch locations. County wide pager system. Radio frequency compliance and planning. Contractual support for Madera County Sheriff radios.
ITSD Wireless (Radio Shop) - Fund 1080 Services Metrics Maintain and service: 3,000 Mobile and portable radios 33 fixed locations for receivers, transmitters and microwave 80 base stations and 350 receivers 1,500 pagers 19 licensed, 12 un-licensed microwave paths Emergency Radio System at 8 Hospitals Paramedic Ambulance to Hospital call in network Maintain 120 FCC Licenses Active in the First Responder Interoperability effort: APCO – Associated Public Safety Communications Officers PSRSPC – Public Safety Radio Strategic Planning Committee CALSIEC – Calif. Strategic Interoperability Executive Committee FUAWG – Fresno Urban Area Work Group
ITSD Wireless (Radio Shop) - Fund 1080 How are service levels determined? Customer support needs. Interaction with customers on response times. Comparison of rates and services to commercial providers. Mandated changes to the communications environment. Technology changes outside the normal refresh process. Ability of customers to fund services.
ITSD Wireless (Radio Shop) - Fund 1080 How are rates calculated? Rates are based on a specific service. Costs relative to that service are accumulated. Accumulated costs are divided by the metric associated with that specific service. Rates based on hardware metrics may contain depreciation costs where appropriate. Resultant rate is billed monthly in arrears for actual use. Labor is billed hourly to the customer who incurred the work.
ITSD Wireless (Radio Shop) - Fund 1080 Overview of reserves held by ISF? Reserves for Fund 1080 (Radio Shop only) as of 8/12/09 = $320,459 Allocated as follows: $ 0 Equipment depreciation is in transition. $ 320,459 Operating capital reserve. $ 320,459 Total Target for 60 day operating capital reserve: $ 341,265 This analysis is based on actual cash available as of August 12 th. Depreciation reserve was still being calculated at the time of this publication due to the recent transfer of the Radio Shop to ITSD. Cash is monitored daily.
ITSD Directions What we want to change: Combine like functions from each ISF. Standardize budget and billing. Lease purchase across useful life for equipment if cost effective. Merge Voice, Data, Radio and Video networks where efficiency can be improved and costs avoided. Replace existing phone system with new technology to reduce operational costs and improve efficiency. Increase emphasis on IVR, conference call and video technology to harvest savings.
ITSD Directions (cont.) Challenges: Narrow Band conversion Federal Mandate 2012 and 2018. Windows XP to Windows 7, skipping Vista. Increased security requirements - NIST. Disaster Recovery Site for County Data Center. Complete the infrastructure updates at the County Data Center. eDiscovery implications. Internet and Social Networking. Opportunities: Thin client desktop. Disaster Recovery Site. Increased use of wireless technology. Energy saving equipment and energy management practices.
ISF Workshop General Services Fleet Services Graphic Communication Services Facility Services Security Services
Fleet Services ISF Services Provided Maintenance and repair of vehicles & equipment Acquisition of vehicles & equipment Fueling stations Motor pool rentals
Fleet Services ISF Service Level User department requests for vehicles/equipment Mandated and regulatory requirements –Fuel tank replacement and inspections –Equipment retrofit (CARB) –Smog checks Technological changes
Fleet Services ISF Service Level Miles driven by rate class (FY 2007-08) Motor pool requests (FY 2007-08) –Total Request for Motor Pool Vehicles 3,826 –Total Number of Days Vehicles were Out15,386
Two major elements: A.Mileage/Meter Rate Maintenance Inventory Purchases (repair and maintenance parts) Fuel - This line item is 33% of the Fleet Services budget that is driven by market conditions/cost and fluctuations which is not a controlled cost. B.Fixed Rate Includes all other operational costs: data processing services, small tools, and PeopleSoft charges, etc. Fleet Services utilizes the Producer’s Price Index to compute monthly inflation rate (recommended in an audit by the Auditor/Controller) Fleet Services ISF Rate Calculation & Allocated Costs
Costs are allocated to user departments based on usage, i.e. number of vehicles assigned, miles driven, motor pool requests, etc.
Fleet Services ISF Rate Calculation & Allocated Costs Rates calculated based on: Historical costs (accumulated by shop) Anticipated program changes Contract increases Cost increases for uncontrollable commodities, i.e. fuel Service levels as requested by user departments Cost accounting principles and methodology 100% recovery of operational costs
Fleet Services ISF Cost Reductions What departments can do? Return underutilized vehicles/equipment Ensure semi-annual maintenance is performed Monitor/control miles driven and fuel consumption by reviewing monthly billings
Fleet Services ISF Reserves As of 6-30-09, there was $6,702,878 held in reserves to support fixed asset purchases and operations. $ 2,032,700Designed for fixed asset purchases $ 2,098,178Equipment depreciation $ 2,572,000Operating capital reserve $ 6,702,878 Total Target for 60 day operating capital reserve: $2,572,000 Cash is monitored daily and depending on payments in process and relationship to billing cycle, total on hand will vary. Departments are billed on a monthly basis in arrears
Graphic Communication Services Internal Services Fund
Graphic Communication Services ISF Services Provided Postal services Countywide messenger mail service Graphic design services Central printing Copy services
Graphic Communication Services ISF Service Level User department requests for postal services, Countywide messenger mail service, graphic design services, central printing and copy services Technological changes
Graphic Communication Services ISF Service Level Postage expense based on user department postage needs –FY 2007-08$2,039,649 –FY 2008-09$2,015,300 –Postal increases: May 2007 $.02 May 2008 $.01 May 2009 $.02 May 2010 $.02 - $.04 Number of copies requested by user departments –FY 2007-086,500,000 –FY 2008-098,500,000 –Copy costs: FY 2007-08County $.029Kinko’s $.04 plus tax FY 2008-09County $.030Kinko’s $.04 plus tax FY 2009-10County $.026Kinko’s $.04 plus tax
Graphic Communication Services ISF Service Level County messenger mail service stops –FY 2008-09267 locations –FY 2009-10137 locations –In FY 2009-10, the method in which charges to user departments for County messenger mail services changed to a per stop charge. User departments were able to consolidate stops based on their needs.
Graphic Communication Services ISF Rate Calculation Rates calculated based on: Historical costs (accumulated by type of service) Anticipated program changes Contract increases Cost increases for uncontrollable services, i.e. postage Service levels as requested by user departments Cost accounting principles and methodology 100% recovery of operational costs Costs are allocated to user departments based on usage
Graphic Communication Services ISF Cost Reductions What departments can do? Monitor/control services requested by reviewing the monthly billings
Graphic Communication Services ISF Reserves There currently is $66,000 in reserves held by Graphic Communication Services. In 2003, a PeopleSoft interface error occurred, which resulted in a deficit of $689,290. A deficit recovery plan was established in conjunction with the Auditor-Controller to reduce the deficit. As of August 1, 2009, the deficit has been eliminated. Target for 60 day operating capital reserve: $677,157 Cash is monitored daily and depending on payments in process and relationship to billing cycle, total on hand will vary. Departments are billed on a monthly basis in arrears
Facility Services ISF Services Provided Operations and maintenance of County facilities necessary to preserve its fixed assets Janitorial services in County owned and many leased facilities Custom services such as remodeling, modifications and furniture moves Voice and data cabling as requested through ITSD
Facility Services ISF Services Level Requirements to preserve and maintain County facilities and equipment –Preventive maintenance –Repairs for infrastructure/equipment failures –Replacement of infrastructure/equipment as recommended by manufacturer and industry standards Mandated requirements –Permits –Load Tests Technological changes User department requests for extra services
Facility Services ISF Services Level Basic Services –Structure- Plumbing –Utilities- Basic janitorial –Pest Control- Window washing –Maintenance painting- Generators –Fire extinguishers- Elevators –Basic locksmith- Damage in common areas –Fire sprinklers- HVAC –Maintenance floor replacement –Safety issues – spills, hazardous situations, security Extra Services –Remodeling –Furniture moves –Services beyond basic janitorial –Inmate Damages –Cabling requests from ITSD-Communications –Replacement of lost or unrecovered keys and rekeying due to unrecovered keys, etc.
Rates calculated based on: Historical costs (accumulated by facility/campus) Anticipated program changes Contract increases Cost increases for uncontrollable services, i.e. utilities Service levels as requested by user departments Cost accounting principles and methodology 100% recovery of operational costs Facility Services ISF Rate Calculation & Allocated Costs
Costs are allocated to user departments based on facility and, for multi-use facilities, square footage of occupied space. Costs associated with services provided to leased facilities are charged through direct billings to user departments.
Facility Services ISF Cost Reductions What departments can do? Monitor/control extra services requested, such as increased level of janitorial services Practice energy conservation Plan in advance for relocation/vacancies Review monthly billings
Facility Services ISF Reserves There are currently no reserves held by Facility Services. As a result of budget constraints, it was determined that it would be inappropriate to increase rates to user departments for operating and replacement reserves. Future budgets will include recovery for such reserves. In FY 2009-10, $175,000 was budgeted in the Interest and Miscellaneous Expenditures budget for emergency repairs. Target for 60 day operating capital reserve: $4,045,817 Cash is monitored daily and depending on payments in process and relationship to billing cycle, total on hand will vary. Departments are billed on a quarterly basis in advance
Security Services ISF Services Provided Security of County facilities/grounds and employees County parking program Centralized County identification badge services County high security access control system Transport services for LPS conservatees
Security Services ISF Service Level Requirements to provide security services for County facilities/grounds and safety of employees Mandated requirements –Fire/intrusion monitoring, alarm maintenance and repair –Fire inspections/drills Technological changes User department requests for extra services –Additional security services, i.e. security officers posted at stations as requested by user departments –New requests for installation and activation of security access control system –Transport services for LPS conservatees
Security Services ISF Rate Calculation & Allocated Costs Rates calculated based on: Historical costs (accumulated by type of service) Anticipated program changes Contract increases Service levels as requested by user departments Cost accounting principles and methodology 100% recovery of operational costs
Security Services ISF Rate Calculation & Allocated Costs Costs are allocated to user departments based on facility and, for multi-use facilities, square footage of occupied space.
Security Services ISF Cost Reductions What departments can do? Monitor/Control extra services requested by reviewing monthly billings
Security Services ISF Reserves As of 6-30-09, there was $289,686 held in Reserves, which is about 20 days of operating capital reserve Target for 60 day operating capital reserve: $815,750 Cash is monitored daily and depending on payments in process and relationship to billing cycle, total on hand will vary Departments are billed on a quarterly basis in advance
Coordinate management of workers’ compensation claims between departments and third party administrator (TPA). Monitor TPA to ensure effective service delivery. Review and recommend settlement proposals. Assist departments in the interactive process for industrial and non-industrial conditions. WORKERS’ COMP. PROGRAM Services Provided Outcomes Prevent injuries to County employees; Mitigate costs where injuries do occur; Facilitate proactive resolution of all claims in order to get injured employees back to the level of productivity experienced prior to the occurrence of any injury.
COST REDUCTION EFFORTS WORKERS’ COMPENSATION Loss Prevention Training (ergonomic, Defensive Driving, etc.) Proactive On-site Safety Inspections to assist departments in identifying and resolving issues Proactive approach in determining AOE/COE issues Proactive Claims Management Triennial WC & Safety Coordinator Meetings Continued Updating of Intranet Site
WORKERS’ COMPENSATION ALLOCATED PROGRAM COSTS Salaries and Benefits (6 positions) Operating Services and Supplies Direct Program Services and Supplies –Claim Costs (disability, medical, legal, administration) –Self Insured State Assessment –Excess Insurance Coverage (SIR $500,000)
WORKERS’ COMPENSATION FUNDING POLICY Approved by Board on 4-29-03 Fully fund each year’s estimated claims/program cost Adopt a flexible “confidence level” to permit annual program funding within a confidence range of 75% to 85% Amortize deficit over 10 year period
WORKERS’ COMPENSATION FUNDING POLICY 2007-08 75% Conf. Level, no deficit recovery 2008-9 70% Conf. Level, no deficit recovery 2009-10 75% Conf. Level, $1M deficit recovery Due to the downturn in the economy and overall financial hardships facing the County, the Board has waived the funding policy the last three fiscal years as shown below: Actuarial $18.1 $18.8 $20.1 Adopted $14.2 $14.6 $16.7
WORKERS’ COMPENSATION RATE CALCULATION Annual Actuarial Study is performed to determine Countywide Charge Departmental Allocations are based on 80% historical incurred claim costs (7 yrs) and a 20% exposure component – consistent with the State Controller guidelines Total incurred cost per claim is capped at $50,000 to minimize significant departmental rate fluctuations resulting from a single large claim
Manage tort claims for damages against County. Coordinate cases with defense attorneys. Maintain case reserves to reflect true exposure. Ensure compliance with Claims Filing Statute. Represent County in settlement negotiations and court proceedings. GENERAL LIABILITY PROGRAM Services Provided Outcomes Educate departments on safe and appropriate work practices in order to prevent claim accrual; Mitigate costs where claims do occur; Facilitate proactive and effective resolution of all claims.
COST REDUCTION EFFORTS GENERAL LIABILITY Mandated Harassment Training Loss Control Visits Proactive Claims Management Updated Risk Management Intranet Site More Expansive Contract Review Defensive Driving Training Program Proactive On-site Safety Inspections to assist departments in identifying and resolving issues
GENERAL LIABILITY ALLOCATED PROGRAM COSTS Salaries and Benefits (5 positions) Operating Services and Supplies Direct Program Services and Supplies –Claim Costs (judgments, settlements, medical, legal, administration) –Excess Insurance Coverage (SIR $750,000)
GENERAL LIABILITY RATE CALCULATION Annual Actuarial Study is performed to determine Countywide Charge Departmental Allocations are based on 80% historical incurred claim costs (7 yrs) and a 20% exposure component – consistent with the State Controller guidelines Total incurred cost per claim is capped at $50,000 to minimize significant departmental rate fluctuations resulting from a large claim
Personnel Records Management Personnel Transaction Approval Peoplesoft HCM Coordination BENEFITS ADMINISTRATION SEVICES PROVIDED PERSONNEL PROCESSING Outcome Ensure accurate, timely personnel transactions and benefits eligibility that comply with applicable County policies and federal/state law.
Personnel Records Management Online PAN/JCI Forms Department Query Access Enhanced Web Site Personnel Transaction Approval Department Engagement/Education Exploring Third Party Services Peoplesoft HCM Coordination Online Open Enrollment Increased Reporting/Access to Departments BENEFITS ADMINISTRATION COST CONTAINMENT EFFORTS PERSONNEL PROCESSING
Negotiated Benefits Administration Voluntary Benefits Administration BENEFITS ADMINISTRATION SEVICES PROVIDED ANCILLARY/VOLUNTARY BENEFITS Outcome Offering quality benefits for County employees, attracting qualified candidates, and saving money for the County and employees.
Negotiated Benefits Administration Online PAN/JCI Forms Department Query Access Enhanced Web Site Voluntary Benefits Administration Department Engagement/Education Exploring Third Party Services BENEFITS ADMINISTRATION COST CONTAINMENT EFFORTS ANCILLARY/VOLUNTARY BENEFITS
BENEFIT ADMINISTRATION ALLOCATED PROGRAM COSTS Salaries and Benefits (5.5 positions) Operating Services and Supplies Direct Program Services and Supplies –Advance Disability Retirement Payments (reimbursed by retirement/employee)
BENEFIT ADMINISTRATION RATE CALCULATION Total estimated cost to fund the program for the upcoming year is calculated Total estimated cost is divided by the projected number of positions The resulting benefit administration cost per position is published in the CAO’s Budget Instructions Retained Earnings/Deficits are returned or collected over a 3 to 5 year time frame
Health Insurance Eligibility Health Insurance Administration HEALTH ADMINISTRATION SEVICES PROVIDED Outcome Provide quality, cost-efficient health insurance programs to County employees, their dependents and retirees.
Health Insurance Eligibility Online Employee Enrollment Electronic Eligibility Feeds to Vendors Streamline Processes Third Party Administrator Consolidated Billing Health Insurance Administration Dependent Eligibility Audit Explore Purchasing Coalition Options California Health Care Coalition Employee Engagement Project HEALTH ADMINISTRATION COST CONTAINMENT EFFORTS
HEALTH ADMINISTRATION ALLOCATED PROGRAM COSTS Salaries and Benefits (6.5 positions) Operating Services and Supplies Direct Program Services and Supplies –Health Plan Costs (Health, Dental, Vision, Prescription, Mental Health) The total cost of health plans are a pass thru of actual costs which are funded by employees and the County’s contribution toward employee health plans (a prescription rate is calculated by the Health Benefit Consultant to recover estimated costs of the totally self insured prescription program The total cost of health plans for retirees are entirely funded by retiree participants –Employee Assistance Program –Health Benefit Consultant
HEALTH ADMINISTRATION RATE CALCULATION Total estimated cost to fund the program for the upcoming calendar year is calculated Enrollment of the County population and retirees is separated by the number of employee only, employee + spouse/children and employee + family The resulting administration cost is allocated by the breakdown listed above, where the rate increases for employee + populations Retained Earnings/Deficits are returned or collected over a 3 to 5 year time frame
Central Warehouse ISF Transitioning from ISF to General Fund Central Service Program Effective July 1, 2010
Central Warehouse ISF Services Supply and distribution of 93 different paper products and other supplies (gloves, can liners, etc.) Annual inventory purchases of $1.2 million Secure warehouse storage of department items Rental on storage containers both on-site (34) and off-site (4) Administer county-wide shredding contract
Central Warehouse ISF Costs Annual Operating Budget of $1.44 million Inventory Costs (75%) Salaries and Benefits (12%) GSA Services Costs - Fleet, Buildings and Grounds, Facility Services (8%) Other ISF Costs - PeopleSoft, Data Processing, Liability Insurance, etc. (3%) Other - (2%)
The gradual reduction in the number of inventory items carried by the Central Warehouse has reached the point where it is no longer an efficient use of resources to operate as an ISF. There are more cost effective means for departments to order supplies directly from the vendors. The Central Warehouse no longer meets the requirements to function as an ISF. Why Transition the ISF to a General Fund Central Service Program?
Services to be Provided as a General Fund Program Storage of departmental inventory items (paper towels, janitorial supplies, toilet paper, copy paper, envelopes, etc.) Shipping and receiving for the County On-request delivery of storage items to departments Administer county-wide shredding contract
Projected FY 2010/11 Costs as General Fund Program Warehouse Operation Expenses $199,020 Offsetting Warehouse Operation Revenues ($139,300) Net County Cost $ 59,720
Central Warehouse Next Steps September 2009 - Departments notified that Central Warehouse ISF is transitioning to Central Service General Fund Program April 2010 - Purchasing adds departments to current vendor contracts for inventory items May 2010 - Warehouse stops buying inventory July 2010 - Departments begin buying their own supplies
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