REPORT - Peace River Regional Districtprrd.bc.ca/board/agendas/2018/2018-11-599405334/... · The...

REPORT

Staff Initials: Dept. Head: CAO: of 2

Date: March 12, 2018 To: Chair and Directors

From: Chris Cvik, Chief Administrative Officer

Subject: KPMG Audit - Review of Recommendations

RECOMMENDATION(S):

1. That the Regional Board approve the attached Implementation Plan from the Chief AdministrativeOfficer that was developed based on recommendations in the KMPG Audit.

BACKGROUND/RATIONALE:

At the March 8, 2018, PRRD Board Meeting, the following was approved.

CW/18/02/03 MOVED Alternate Director Lavoie, SECONDED Director McPherson, That the Committee of the Whole recommend to the Regional Board that the PRRD Operational Review and Efficiency Audit Final Report be referred to the Chief Administrative Officer for a review of its recommendations and a report to the Board regarding the phased implementation of the recommended actions, including identification of any of the recommendations the Chief Administrative Officer does not propose to implement and his rationale for rejecting or dismissing those suggested actions.

CARRIED.

In addition, at the meeting on March 8th, the following motion was released from the February 22, 2018, Closed Meeting:

“That the Board supports the hiring of a full-time Procurement Manager by putting a placeholder in the 2018 budget on the condition that staff do not proceed with a job posting until:

The Chief Administrative Officer provides a report outlining all the recommendations from the KMPG Efficiency Audit including:

• Recommendations that will be implemented immediately and explanations why.

• Recommendations that will be deferred to a later date, and why.

• Recommendations that will not be implemented, and why.

• An implementation plan moving forward.

• A job description is provided to the Board for discussion to ensure the position meets theirneeds.

DISCUSSION:

The CAO met with the Senior Leadership Team on March 1 and 2 to review and prioritize the information in the KPMG Audit which consisted of eight recommendations, one of which identified 20 individual process improvements. The outcome from the meetings is a suggested Implementation Plan.

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KPMG Audit - Review of Recommendations March 12, 2018

of 2

OPTIONS:

1. That the Board provide further direction to administration.

STRATEGIC PLAN RELEVANCE:

☐ Ensure that the Solid Waste Management Plan is operating on a fiscally defensible basis.

☐ Ensure effective execution of Public Safety and Emergency Services initiatives.

☐ Foster Collaboration on services with municipalities and electoral areas.

☐ Establish a strategy for coordinated advocacy on identified issues.

☐ Manage parks and trails in the region.

☐ Support the agricultural industry within the regional district.

☒ Not Applicable to Strategic Plan.

FINANCIAL CONSIDERATION(S): N/A

COMMUNICATIONS CONSIDERATION(S): N/A

OTHER CONSIDERATION(S): N/A

Attachments:

KMPG Audit – PRRD Implementation Plan February 22, 2018 – KPMG Final Report Presentation – Operational Review and Efficiency Audit.

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KPMG Audit – PRRD Implementation Plan

1

Opportunity Description of Opportunity Budget Impact

Overall Benefit to

PRRD

PRRD Response

1. Eliminate feesfor lowvolumelandfills andtransferstations

Our analysis of PRRD’s financial budget indicates that a number of transfer stations have and are expected to continue to generate minimal revenue for PRRD while still requiring periodic accounting and banking on the part of finance staff.

+$5,300 Low Recommendation: Opportunity be forwarded to Solid Waste Committee for consideration.

Administration comments:

If implemented, will need to update fee bylaw.

Staff opinion is illegal dumping will likely continue.

KPMG recommendation is about collecting tipping fees. It does notrecommend leaving them unmanned.

Saves the cost of computers and processing debit amounts.

2. MonitorworkloadrequirementsforCommunityServices andotherdepartmentsin light of newprograms,changes toexistingprograms andcapacitycreatedthrough otheropportunities

As noted earlier in our report, a discrepancy between workload demands and available resources appears to have developed with respect to grants and third-party contracts due to a combination of:

• Increases in the level of grant applications;

• Increases in the scope of work required for the processing of grant applications;and

• Requests placed on PRRD personnel for ongoing support to communityorganizations once contracts/grants have been approved and paid.

The results of the process mapping have also identified potential risk exposures with respect to contractual arrangements with third parties:

• Some organizations are providing services without valid contracts (either nocontracts were negotiated historically or the original contracts have expired). Weunderstand that PRRD personnel are currently working to address this backlog toensure that current contracts are in place for all arrangements;

• Some organizations are suspected of not adhering to necessary risk managementrequirements, including compliance with PRRD policies (where the contractsinvolve PRRD facilities) or insurance requirements; and

• While contracts include provisions for PRRD to conduct periodic performanceevaluations, the limited capacity of staff typically results in these evaluations not

+$80,000 to

$90,000

High Recommendation: No increase to Community Services staffing in 2018. Use 2018 as a monitoring year to assess impact of Electoral Area Manager position on Community Services workload.


Issue of administration support for Community Services will need to beaddressed during 2018.

Monitoring of Community Services Department to include: Projects on ‘to-do’list, tracking of grants, annual project plan, feedback from Directors on statusof projects assigned to Community Services.

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2. Continuedbeing undertaken. As such, there is a risk that contract performance standards are not being achieved.

It is expected that opportunities identified through the Review, most notably the establishment of a centralized procurement function, will alleviate workload demands on Community Services. Accordingly, we suggest that PRRD evaluate the impact of implemented opportunities, with consideration given to establishing a new position (coordinator) within the Department of Community Services in the event that workload demands continue to be an issue post-implementation.

3. Enhancestrategiccapabilities atthe corporatelevel throughtheestablishmentof a newposition forcentralizedprocurement

A key theme arising from the Review was the view that certain strategic-level capabilities, most notably a centralized procurement and contract management function, were absent from PRRD. From our perspective, the reliance on individual departments to conduct their own procurements can expose PRRD to potential risk in different ways:

• Procurement documents may not contain all standard terms and conditionsthat are favourable to PRRD, both in terms of ensuring appropriate risktransference from PRRD to proponents by way of insurance and indemnificationsand dispute resolution clauses in favour of PRRD;

• Procurement documents may not necessarily reflect industry best practices,leading to challenges to procurement processes;

• Contract documents may not contain similar provisions in favour of PRRD; and

• In the absence of a centralized contract administration function, there is the riskthat what is procured is not actually delivered.

In order to address these potential risks, PRRD may wish to consider establishing a new position (Manager of Procurement) that would be responsible for procurement and contract management for all functional departments above an established threshold (e.g. $25,000). Specific responsibilities could include:

• Asset management planning, including the development of long-term capitalforecasts

+$110,000 to

$125,000

High Recommendation: Add Procurement Manager Position to 2018 budget process for consideration.


Job description is important to review with the Board. Procurement Manageris not the same thing as Project Manager. Project Management is still theresponsibility of the General Managers. Management and monitoring is aGeneral Manager responsibility with the assistance of the ProcurementManager, if necessary. The Procurement Manager will help develop RFPdocuments, solidify, write and sign contracts. The ProcurementManager will help General Manager’s track milestones through theprocess and will track renewal notices etc. The Procurement Managerwill also have a role in Asset Management.

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3. Continued….

• Risk management relating to infrastructure and capital projects, includingreviewing the sufficiency of insurance coverage

• Procurement for major projects, including the management of internalprocurement processes (procurement document development, bidderinformation sessions, response to bidder questions, proponent evaluations,negotiations with preferred proponents) as well as the management of externaladvisors for major procurement.

• Consideration and implementation of alternative procurement approaches (e.g.design-build, vendor of record arrangements)

• Project and contract management of major infrastructure projects, includingproject tracking and reporting to SMT and the Board of Directors

• Quality assurance for capital projects

• Legislative compliance and permits

We note that Cariboo Regional District has a similar position within its organizational structure.

4. Implementorganizationalchanges toenhancedecisionmakingamong theseniormanagementteam

In addition to the changes noted elsewhere in our report, PRRD may wish to consider the following changes to its organizational structure and decision making forums:

• Establishing a new department – the Office of the CAO – which would beresponsible for the delivery and oversight of corporate-wide policies and services,including human resources, procurement, contract management, assetmanagement, risk management and communications. This would result in PRRD’scommunications function being transferred from Corporate Services to the Officeof the CAO;

• Removing the Communications Manager from attendance at SMT meetings, asthis is inconsistent with (i) the definition of senior management (general manageror equivalent); (ii) the treatment of other managers within PRRD.

• Establishing a protocol for senior management decision making whereby:

• SMT meetings are utilized for decision-making on initiatives impactingmore than one functional unit, with members of the SMT supporting theagreed-upon course of action once it is made;

None Moderate Recommendation #1: Move the reporting relationship for the Electoral Area Manager from Community Services and have the Procurement Manager report to the Corporate Officer in the Corporate Administration Department.


The KPMG Audit recommended the creation of the Office of the CAOwherein the Deputy CAO would have the Electoral Area Manager,Procurement Manager and Communications Manager all reporting tothe position. This is not recommended as the role of the Deputy CAOis to support all General Managers as opposed to managing adepartment. The Procurement Manager should report to theCorporate Officer given the close relationship involved with the natureof the work. Communication will continue to remain reporting theCorporate Officer within the Corporate Administration Department.

If the position is approved, the Procurement Manager office would belocated where the Secretary of Legislative Services (Brenda Deliman) islocated with Brenda moving to the vacant cubicle directly in front.

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4. Continued….

• Interactions between staff and Directors at meetings of the Board ofDirectors are initiated by Directors and directed through the CAO.

Recommendation #2: The Communications Manager will no longer attend Senior Management Team (SMT) Meetings.


The issue is not so much is that the Communication Manager isattending SMT meetings, it is that other Managers at the sameorganizational reporting level are not.

In the absence of the Communication Manager at the SMT meetings,it will be important for the Corporate Officer, as the direct supervisor,to ensure that any items of importance from a communicationsperspective be shared.

Other Recommendations: The Senior Management Team also discussed some other changes not identified in the audit to improve organizational efficiency.

1. The Information Technology (IT) Department will assumeresponsibility for cell phones from the Financial Services Department.Financial Services Department will still have a role in setting up anyaccount and processing the financial transaction, while the ITDepartment will be involved in purchasing the phone and ensuring it isoperational for the user.

2. The Environmental Services Department will assume responsibility forkeys (security) from the Financial Services Department. Included inthis will be:

Internal procedure for issuing keys.

Reprogramming the exterior doors so each person has their ownunique access code.

Developing an internal procedure for issuing security code accessto contractors performing work in the FSJ and DC Offices afterhours.

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4. Continued…

3. The Financial Services Department will develop a new process for thedisposal of surplus equipment. Currently, we have a Policy that statessurplus items will be disposed of through a ‘Yard Sale’. This isinefficient and surplus item sit in the warehouse taking up valuablespace. The new process will involve disposing of surplus itemsthrough the Government Deals Program which is an ongoing on-lineauction.

4. A future opportunity is to determine who is using the weekly ReadingFile that is sent to Directors and whether there is a more efficientmethod of sharing Director’s Information File material. The currentmethod adds approximately one to two hours per week to theCorporate Administration Department workload. If the information isnot being viewed by the majority of the Board Members, it should bediscontinued.

5. Implementorganizationalchanges toenhance theeffectivenessof theElectoral AreaManager

While Electoral Area Directors view the established of the Electoral Area Manager (“EAM”) position as benefiting their effectiveness in their role as elected representatives, the Directors also noted that PRRD’s organizational structure may preclude the EAM from being fully effective. Consistent with the view of the Elected Area Directors, we note that the EAM may have limited ability to influence the progress of issues relating to Electoral Areas as she currently is placed within the Community Services division as opposed to a more strategic, organizational-wide function.

In order to maximize the effectiveness of the EAM position, consideration could be given to shifting the EAM into the Office of the CAO, based on the following anticipated benefits:

• Greater ability to work across functional units;

• Ability to leverage support of the CAO to resolve Electoral Area issues; and

• Ability to deal with strategic issues in conjunction with other strategic issuesbeing addressed by the Office of the CAO.

In addition to revising the lines of reporting for the EAM, we also suggest that PRRD establish a formal process for tracking and reporting on issues raised by Electoral

None Moderate Recommendation: The Electoral Area Manager will report to the Deputy CAO.


The Electoral Area Manager’s office will move from downstairs to thespace currently occupied by the Manager of Protective Services whowill move to the Electoral Area Manager’s office.

Approval of the draft Policy and Procedure for Electoral Area SpecificIssues will help enhance the effectiveness of the Electoral AreaManager position.

The Electoral Area Manager is set up on Basecamp to ensure thatissues assigned to the position are tracked.

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Area Directors. Specifically, consideration could be given to:

• Establishing criteria for those issues that should be referred to the Board orcommittees, as opposed to general managers; and

• Establishing a reporting tool that tracks issues, whether they have beenresolved and the timeframe for resolution.

6. Implementchanges tothe CAOperformanceevaluationprocess tomonitor theeffectivenessoforganizationalaccountability

Notwithstanding the performance of quarterly reviews for PRRD senior management, a majority of Directors have expressed concerns over accountability and the extent to which performance issues are appropriately addressed.

The evaluation of the performance of PRRD’s senior management team rests with the CAO, while the Board is responsible for evaluating the performance of the CAO. Consistent with its role as a governance body, we do not believe it is appropriate for the Board to be involved in the evaluation of senior management personnel directly. However, it may be relevant to consider the effectiveness of the CAO in managing the performance of the senior management team as part of the Board’s evaluation of the CAO.

In connection with Board’s concern over senior management performance and accountability, consideration could be given to:

• Formally including an assessment of the CAO’s effectiveness in managing theperformance of the senior management team in the CAO’s annual performance;

• Identifying development opportunities for senior management personnel toensure they have the requisite skills for their responsibilities, which may includeexternal training, ongoing executive development and the use of mentors; and

• Ensuring that all parties (Board, CAO and management) have a clearunderstanding of all aspects of PRRD’s performance management processes andjob responsibilities.

None Moderate Recommendation: The CAO will work the Board to develop a reporting metric as part of the CAO’s annual performance review process to assess the CAO’s effectiveness in managing the performance of the Senior Management Team.


The CAO conducts quarterly reviews as well as an annual review withthe members of the Senior Management Team. The KPMG reportincorrectly stated that semi-annual reviews were completed.

The Board should not have access to individual General Managerperformance review information.

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7. Revise theDirector Codeof Conduct toformallydefine theprocess forinteractionbetweenDirectors andstaff

7. Continued…..

PRRD currently does not have a formally defined process for interactions between Directors and staff. In the absence of this, we understand that interactions are conducted on an ad hoc basis, with multiple levels of staff interacting with Directors and no formal tracking of Director requests.

Given that the current absence of a formal process contributes towards frustration on the part of Directors and staff, PRRD may wish to consider revising the Director Code of Conduct to indicate the following:

• Directors are required to contact General Managers with requests or questionsrelating to PRRD operations. This would preclude Directors contacting other staffmembers within the organization, providing for a consistent approach toDirector-staff interactions;

• Inquiries to General Managers should preferably be made by email;

• The CAO should be copied on all communications between Directors andGeneral Managers; and

• The Electoral Area Manager should be copied on all inquiries made by ElectoralArea Directors.

None Moderate Recommendation: The CAO will prepare a revised Directors Code of Conduct to more formally define the process for interaction between Directors and staff.


Directors should go to General Managers and not directly to staff withany requests. The two exceptions to this are:

o Planning and Development Services. There is a Boardapproved two-week Referral Process whereby Directors workdirectly through Planning and Development Services staff onreferral questions.

o Electoral Area Manager. The Electoral Area Directors do notneed to go through the Deputy CAO to assign work to theElectoral Area Manager position.

If there are any changes to the Code of Conduct, the Exempt StaffEmployment Agreement document will need to be updated, as itincludes a section on ‘Requests from Board Members’.

Where possible, requests should be made via email with a copy to theCAO and/or the Electoral Area Manager if the request is coming fromthe Electoral Area Directors. Including the CAO will help ensurerequest does not get dropped if the General Manager is away.

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KPMG Business Process Audit – PRRD Implementation Plan

8

Process Description of Risk Potential Course of Action PRRD Response

1. Accounts

payable

PRRD does not use purchase orders for procurement.

As such, there is a risk that departments will purchase

goods or services without sufficient budget room. The

absence of purchase order requirements also exposes

PRRD to risk in the event that unauthorized purchases

are made as it has no current process for monitoring

commitments made by personnel until after the goods

or services are received (which may commit PRRD to

the expenditure)

PRRD may wish to consider the

implementation of a formal purchase

order system that requires personnel to

obtain approval prior to the ordering of

goods and services. If adopted, suppliers

should be advised of the requirement that

all invoices must quote a PO number in

order for payment to be received.

Recommendation: Not to implement, risk is minimal. Purchasing policy in

place. Too much staff time for Finance and staff purchasing. Would need

extra part time staff.

General Manager is responsible for own budget (Operational and Capital)

whether they approve before or after. Key risk is going over budget.

Purchasing Policy says under $500 go buy. There are procedures. Minimize

risk not increase complexity.

Estimate that it would require ¼ to ½ FTE position to implement

recommendation.

2. Accounts

payable

PRRD’s process for new vendor set-up involves minimal

controls and review and is initiated once an invoice is

received. It is possible that management staff can

purchase goods or services from related parties or

false vendors without independent due diligence into

the vendor.

PRRD may wish to establish a process

whereby new vendor set-up requires

certain verification procedures, including

proof of operation and reviews of

potential conflicts of interest.

Recommendation: Not to implement.

Administration Comments:

The organization has had no issues with the process thus far. Cheques are

issued quite often. Finance sets up companies in their system to verify. As

soon an account is setup, Finance can tell if it’s fake. FTE’s are checked to

ensure deposits went to the right account. Verification process for

updating account numbers, as businesses send a void cheque or paper

from the bank.

Estimate that it would require one day per month to implement

recommendation.

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3. Accounts

payable

PRRD’s account payable process is paper-based, with

emailed copies of invoices printed out for processing.

This represents a potential inefficiency as (i) the

process consumes time and resources associated with

the printing of electronic invoices; and (ii) the approval

process involves the physical movement of invoices as

opposed to email.

PRRD may wish to consider the use of

electronic invoices as opposed to paper

copies, whereby invoices received by mail

are scanned prior to processing. Approval

by managers can be done on-screen based

on scanned invoice copies maintained in

dedicated server folders.

Recommendation: On-going, adjusting to electronic.


Long term implementation. Finance is encouraging invoices be emailed

to Accounts Payable rather than by mail. Still required to batch invoice for

electronic filing. Finance is working towards it.

Estimate that it would require an addition ¼ to ½ FTE to fully implement

recommendation.

4. Corporate

credit cards

Prior to payment of credit card statements,

cardholders are required to list their purchases on an

MS Excel spreadsheet, which forms the basis for

coding. The use of a spreadsheet as opposed to the

credit card statement represents an inefficiency as (i) it

is a duplicate entry of the same data; and (ii) finance

department staff are required to follow up on

purchases that may be listed on the statements but

not on the spreadsheet.

Coding of credit card statements should

be made on the statement itself,

eliminating the need for a separate

spreadsheet.



Not enough space on the actual credit card statement for proper legible

coding. Spreadsheet is much more efficient as it self calculates and there

is space for information and coding.

Estimate that it would require an addition 2 – 3 hours per month to

implement recommendation.

5. Corporate

credit cards

The CAO’s corporate credit card statements are

approved by the Chief Financial Officer. Given the

nature of the reporting relationship, it may be possible

that the approval process for the CAO’s credit card

purchases may be affected by undue pressure.

Credit card statements for the CAO should

be approved by the Chair of the Board of

Directors.

Recommendation: Send the Chair a copy of CAO’s credit card statements

and expense claims for his review after payment has been made.


Never been an issue. Could create a private spot on the website for

Director access for them in order to see reconciliation - not to approve

due to time delays for payment.

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6. Fuel cards PRRD provides fuel cards on a per vehicle basis. When

fuel purchase statements are received, there is no

reconciliation between the amount of fuel purchased

and the odometer readings of the vehicles in question.

As a result, it may be possible for staff to use PRRD fuel

cards to purchase fuel for personal use.

PRRD may wish to consider the

implementation of periodic analysis of fuel

purchases to odometer readings on a

timely basis, with additional analysis of

the timing and location of fuel purchases

conducted as part of the review.

Recommendation: Agree. Move to monthly analysis (from annual) of gas

log books.

Information is entered into log books and it is flagged when we pay more

for fuel then to month before. Moving to monthly log books for vehicles as

opposed to when they are full. Procurement Manager could potentially go

to RFP for a preferred supplier of fuel for the best deal and it will be easier

to track. Gas station locations and safety is an issue for consideration. We

have 3 suppliers now for convenience of location.

Change fuel log to track the number of people travelling in a vehicle at any

given time.

Estimate that it will save two (2) days per year to implement

recommendation.

7. Payroll Employees receive a copy of their approved timesheet

from their department head and also receive a copy of

their pay stub at the end of the payroll process. The

pay stub contains the same information (hours

worked, carry forward balances) as the approved

timesheet, therefore this is a duplicate process. It is

suggested to remove this step and only provide copies

of approved timesheets upon request.

PRRD may wish to discontinue the

distribution of timesheets to employees

unless specifically requested to do so.

Recommendation: Agree - explore Vadim HR module.


Vadim system has a payroll module with timesheet capability. Need to

explore further to see if there are any efficiencies over current process.

8. Development

applications

Physical files for development applications received in

the Fort St. John office are automatically forwarded to

the Dawson Creek office for input into the MS Access

database and then returned to the Fort St. John office

for assignment to a planner. This represents a back-

and-forth physical movement between the two offices.

Consideration could be given to allowing

personnel in the Fort St. John office access

to the MS Access database, thereby

eliminating the need for movement of the

files to and from the Dawson Creek office.

Recommendation: Agree.

Implementation of the new records management system will allow for

better tracking of development applications. Information will be kept in

the Dawson Creek Office and be accessible to Fort St. John Planning staff.

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9. Development

applications

We understand that the thresholds for public

notification have increased in recent years, which

creates additional work for planning staff in connection

with communications and public meetings.

PRRD may wish to adjust its notification

standards to reflect the relative densities

of the planning areas. Specifically, lower

thresholds can be established for areas

with higher densities, with increased

thresholds established for lower density

areas. We understand that PRRD has

discretion with respect to notification

thresholds as these are not regulated by

the Province.

Recommendation: Forward to EADC for further discussion around Local

Government Act requirements.

There are financial considerations with providing notice. The GIS

Department has said that different notification standards can be

developed. It is not a simple solution. What is higher and lower density

will need to be determined (perhaps fire protection boundaries can be

used). Important to have consistency. Elected Officials have recently

expressed a desire for greater notification. Public Notice is the only

requirement by legislation.

10. Development

applications

We understand that PRRD has discretion as to the

nature of its review of Agricultural Land Reserve

applications, which are currently subject to reviews for

compliance with zoning, bylaws and OCP. This

represents a discretionary level of review that could be

reduced.

PRRD may wish to discontinue reviews of

Agricultural Land Reserve applications.

Recommendation: Agree.

Administration will investigate either discontinuing ALR referrals or

simplified Board Report content (i.e., does application meeting OCP and

Zoning).

ALR referral reports take up a significant amount of Planning and

Development Services staff time.

Estimate that it will save 4 to 5 days per month of Development Services

Planners time by not having to prepare detailed ALR Reports for the ALC’s

review.

11. Development

applications

Development personnel currently undertake a

minimum of one site visit for all development

applications, which may involve significant travel time

for PRRD personnel. We understand that development

application site visits are not required by regulation.

PRRD may wish to consider establishing

criteria for development application site

visits such that only applications that meet

certain criteria require visits. In addition,

PRRD may wish to consider alternative

sources of information concerning sites

Recommendation: Continue to research.

Online satellite imagery is not up-to-date. Pictures taken by someone else

by not be valid.

SMT discussed developing a ‘threshold checklist’. Look for opportunities to

use technology (emailed picture, drone imagery or video). Would need to

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(e.g. online satellite imagery) to eliminate

the need for a physical visit.

develop file storage protocols for electronic attachments to development

permit applications.

12. Building permit

applications

The current fees charged by PRRD for building permit

applications do not appear to be sufficient to cover the

actual cost of the building permit approval process

(which involves five inspections by PRRD personnel).

Accordingly, the cost of providing building permit

services is being subsidized by residents that are

technically not receiving the service.

PRRD may wish to review its building

permit fee schedule in order to determine

if any increase in building permit fees may

be warranted as a matter of fairness.

Recommendation: Agree. Low priority

Reviewing fees and charges on a regular basis is a good practice.

Benchmark fees charged by other Regional Districts. Use as reference only.

Discuss topic further at Electoral Area Director’s (EADC) Meeting.

Note: Increasing fees may discourage people from applying for permits in

the voluntary areas.

13. Third party

contracts

With respect to third-party contracts, it was noted

that:

• Some organizations are providing services

without valid contracts (either no contracts

were negotiated or the original contracts have

expired);

• Some organizations are suspected of not

adhering to necessary risk management

requirements, including compliance with PRRD

policies (where the contracts involve PRRD

facilities) or insurance requirements; and

• While contracts include provisions for PRRD to

conduct periodic performance evaluations, the

limited capacity of staff typically results in

these evaluations not being undertaken. As

such, there is a risk that contract performance

standards are not being achieved.

PRRD should develop a third party

contract register that identifies all third

party contract arrangements and the

related contract details. In addition, PRRD

should perform verification that required

performance standards and risk

management requirements are actually

being performed by third party

contractors.

Recommendation: Agree. Opportunity to tighten-up third party contracts

in particular – monitoring and ensuring that vendors or volunteer

organizations have proper permits in place. Work towards over next year

to utilize recent changes to records management system to develop a

single file where everyone knows to go to. May tie into Procurement

Manager position for overall tracking or registration system. All

departments would participate.


Staff time and capacity will likely be and an issue. Opportunity for

Procurement Management position to help develop overall tracking

process to allow for better monitoring by the various departments.

NOTE: Administration believes this is the highest priority item of the

suggested KPMG Process Improvement suggestions.

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As a result of the above, PRRD may be exposed to the

following risks:

• Third party contractors are not adhering to

performance standards in the contracts

• Insufficient risk transfer from PRRD to third

party contractors may have occurred as a

result of the absence of a formal/current

contract or the failure of third parties to

adhere to contract requirements relating to

insurance, compliance with PRRD policies and

other provisions

14. Cash receipts

(requisition)

PRRD’s process for recording the annual requisition

involves the use of a clearing account, which is

reconciled by finance department personnel to nil on a

monthly basis. There does not appear to be a

threshold for acceptable differences that do not need

to be reconciled and as such, finance personnel may be

investing time to reconcile relatively minor differences,

resulting in situations where the cost of reconciling the

difference is larger than the difference itself.

PRRD may wish to consider establishing a

threshold for all reconciliations whereby

unreconciled differences below the

threshold are not reconciled but rather

charged to an operating account.

Recommendation: New CFO to determine if they want to set a threshold

for monthly reconciliation write offs.


Finance does write things off if they are small amounts, as sometimes more

time is spent in staff time chasing invoices. There is a point where Finance

stops investigating or defers it to be looked at again at a later date.

Financial Services staff try to ensure numbers balance as best as possible

on an ongoing basis as opposed to waiting until year end. Reconciliation

frequency is based on work load. If it’s over $100 they don’t let it go.

15. Cash receipts

(landfill fees)

PRRD currently collects landfill fees from transfer

stations that generate minimal amounts of revenue

(e.g. less than $10 per week). In these instances, the

cost of processing the transactions through PRRD’s

Paradigm and Vadim systems may exceed the revenues

received.

PRRD may wish to establish a threshold

for charging landfill fees, whereby transfer

stations that do not exceed the threshold

are exempt from charges.

Recommendation: Opportunity be forwarded to Solid Waste Committee

for consideration. Refer to Opportunity #1 under Process Improvements.

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16. Cash receipts

(landfill fees)

PRRD currently maintains duplicate data input

processes over cash receipts for landfill revenues

(Paradigm and Vadim system), resulting in a

duplication of efforts on the part of finance personnel.

PRRD may wish to select one system as

the primary data entry capture point, with

data then transferred by electronic upload

into the other system.



Finance does not enter the same data in two programs – there is some

overlap between Vadim and Paradigm but it is not identical. Upload to

make two systems ‘talk’ takes less than two minutes. If we went with the

suggestion more training would be required and high licensing fees would

be incurred (Paradigm). One program doesn’t handle everything, Both

programs work well together. If we don’t do it this way every landfill has to

run two programs and they would have to be always reconciled. These

systems also have their own inherent checks. Landfill operators would be

able to make payments and that would be a mess.

17. Cash receipts

(landfill fees)

PRRD’s process for setting up a new customer for

landfill services involves the completion of a credit

check, which is used to establish a credit limit for the

customer. However, the current process for billing and

payments does not consider the established credit

limits and as such, customers can owe in excess of

their credit limits. This exposes PRRD to the risk of bad

debts.

PRRD may wish to perform periodic

reviews of customer balances in-month to

determine if their credit limits have been

exceeded, with customers then required

to make payments prior to the acceptance

of additional waste.

Recommendation: Agree. In-progress. Not a top priority. Current system

allows credit maximums - so this just needs to be implemented.


For new clients, provide lesser credit limit. After set-time, increase limit if

no concerns. We are looking at the features included in Paradigm. If a

company hasn’t paid in 90 days they are cut off. Because Vadim and

Paradigm talk back and forth there is a spot to put in a credit limit, if it is

reached they would be flagged and the attendant would warn them. The

credit limit is established through the application process. The company

says what limit they want. Very small number of write-offs due to

companies going bankrupt over the last ten years.

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18. Cash receipts

(landfill fees)

Finance personnel currently perform frequent

reconciliations (daily) between landfill transactions

recorded in the Paradigm system and the Vadim

system. We understand that this is intended to

provide a real-time capability in the event that

customers request the balance of their account, which

we consider to be an exceptionally high service

standard that requires time from finance personnel.

PRRD may wish to expand the frequency

of these reconciliations (e.g. perform

twice a week) in order to create capacity

within financial services, recognizing that

customer accounts may be one to two

days out of date.

Recommendation: Defer decision to new CFO.

Financial Services reconciles daily. However, when other work takes

priority, reconciliation work is pushed based. Reconciling Solid Waste takes

the most time.

19. Cash receipts

(sewer and

water)

For certain customers, PRRD purchases water from a

municipality and bills customers the aggregate

amount, with no mark-up for administration of the

billing process. As a result, water customers may be

subsidized by other residents as they do not contribute

towards the cost of water billing.

PRRD may wish to implement an

administrative surcharge to eliminate the

potential for cross-subsidization of water

billing services.

Recommendation: Investigate developing a formula to apply

administration fees to all functions.

Right now a flat amount is charged to each function. We are collecting a

flat dollar administration fee through admin surcharge applied to the

function.

Contact other RD’s to see how they apply Administration fees to each

service.

With respect to the airport sub-division, we buy our water and collect an

admin fee from the subs so we do not add a user fee and we get the bill

from the airport. What the municipality charges us, we charge the user.

We do not need to add another fees as we already charge the service a flat

dollar administration fee.

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20. MFA financing The current process for collection of payments from

municipalities for debt financing involves PRRD issuing

monthly letters to municipalities and the holding of

post-dated cheques. This represents an inefficiency as

it is paper-based and manual, with PRRD personnel

required to follow up with the municipalities if

payment is not received.

PRRD may wish to consider the use of

regular monthly bank transfers from

municipalities, established at the

commencement of the loan repayment

cycle, thereby eliminating the need for

monthly reminders and the administration

of post-dated cheques.

Recommendation: Agree. New process has been implemented. Places

responsibilities on municipalities to ensure that payments are received at

the Regional District in a timely manner.

Financial Services sent out notices to the municipalities with deposit

instructions. .

Estimate that new process will save 1 to 1.5 days per month for Financial

Services staff.

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© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 1

Peace River Regional District

Operational Review and Efficiency Audit

Final Report Presentation

February 22, 2018

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Overview of the Review Process

Documentation Review

Staff Consultations

Comparative Analysis

Business Process Mapping

Draft Report Director Consultations

Final Report

Implementation

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Key Themes

1. PRRD compares favourably to selected comparator regional districts

• Benchmarking regional districts is challenging due to differences in services, geographicarea and other considerations

• Notwithstanding these limitations, PRRD compares favourably to selected regionaldistricts in terms of operating costs, staffing levels and financial indicators

$0

$50

$100

$150

911 Service Developmentservices (x$100)

Building inspection(x$10)

Emergencymanagement

Solid wastemanagement

(x$10,000)

PRRD

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Key Themes

2. Opportunities for process improvements are available

• Business process mapping has identified as many as 20 potential opportunities foroperating efficiencies, risk reduction and enhanced internal controls

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Key Themes

3. Some inefficiencies cannot be addressed due to the nature of PRRD’s operatingenvironment

• Travel time is estimated to consume theequivalent of two to three full-time staff,accounting for up to 6% of total staffingor $400,000 per year

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Key Themes

4. Strategic capabilities that would assist PRRD in managing corporate-wide risks arenot present in the organization

• Procurement was most often cited as a strategic capability that was absent from theorganization, resulting in an ad hoc approach to procurement and contract managementthat is performed ‘off the corner of people’s desks’

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Key Themes

5. A meaningful number of directors are concerned about the effectiveness of PRRD’sperformance management functions

• Senior management performance reviews are conducted semi-annually

• Concern is not with frequency but whether the process drives accountability in theorganization, with specific instances cited by directors

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Key Themes

6. The distinction between governance and operations is perceived as being blurred onboth sides of the line

• Staff view directors are becoming involved in operational issues

• Directors view staff as determining policy and strategic direction, which are governancefunctions

• We believe the absence of defined processes and monitoring of issues contributes tothis situation

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Key Themes

6. The distinction between governance and operations is perceived as being blurred onboth sides of the line

• Staff view directors are becoming involved in operational issues

• Directors view staff as determining policy and strategic direction, which are governancefunctions

• We believe the absence of defined processes and monitoring of issues contributes tothis situation

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Key Themes

7. Community services are impacted by workload demands

• There has been a significant increase in grants administered by the department over thepast three years

• Similarly, the frequency of feasibility and other studies has also increased, placingfurther demands on staff

0

50

100

150

200

2015 2016 2017 (9 months)

Grant Applications Received and Processed

Rural Grants-in-Aid Other Rural Grants Regional Grants

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Potential Courses of Action Opportunity Budget Impact

(Net Cost)Ease of

Implementation

Overall Benefit to PRRD

Implementation Timeframe

Address identified process issues (this consists of 20 individual opportunities)

None High Moderate Short-term

Eliminate fees for low volume landfills and transfer stations

+$5,300 High Low Short-term

Monitor workload requirements for Community Services and other departments in light of new programs, changes to existing programs and capacity created through other opportunities

+$80,000 to $90,000 High High Long-term

Enhance strategic capabilities at the corporate level through the establishment of a new position for centralized procurement

+$110,000 to $125,000

High High Short-term

Implement organizational changes to enhance decision-making among the senior management team

None Low Moderate Short-term

Implement organizational changes to enhance the effectiveness of the Electoral Area Manager


Implement changes to the CAO performance evaluation process to monitor the effectiveness of organizational accountability


Revise the Director Code of Conduct to formally define the process for interaction between Directors and staff


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Suggested Organizational Structure

Board of Directors

Chief Administrative Officer

Corporate Officer General Manager of Environmental Services

Deputy CAO

Executive Assistant

General Manager of Community Services

Manager of Procurement

Communications Manager

Chief Financial Officer General Manager of Development Services

New position

Transferred position

Office of the CAO

Coordinator (tbd)

Electoral Area Manager

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Implementation Approach

1. Acceptance of report by Board of Directors

2. Board directs the CAO to prepare a formal report outlining:

• Opportunities to be implemented immediately

• Opportunities to be deferred with rationale for deferral

• Opportunities not to be implemented with rationale for exclusion

3. Board approve CAO implementation report

4. CAO provides periodic reporting to Board (e.g. quarterly) on implementation activities

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© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

kpmg.ca

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