302 Main Street Old Saybrook, Connecticut 06475-1741
BOARD OF FINANCE MINUTES REGULAR MEETING AUGUST 2, 2016 at 7:00 P.M. FIRST FLOOR CONFERENCE ROOM TOWN HALL |
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BOF Attendant Members Absent Members
David LaMay, Chairman Barry O’Nell
Brad Thorpe, Vice Chairman
Tom Stevenson
Breck Lindley
John O’Brien
Carol Rzasa
In Attendance
Carl Fortuna, First Selectman
Bob Fish, Treasurer
Lee Ann Paladino, Finance Director
Call to order
Mr. LaMay called the meeting to order at 7:00 PM
Pledge of Allegiance
Mr. LaMay led the Pledge of Allegiance.
Minutes:
A motion to approve the minutes of July 19, 2016 was made by Mr. O’Brien, seconded by Mr.
LaMay. Discussion: Mr. Stevenson noted that he did not make the comment under the “Liaison
Report” with regard to the Police Commission’s favor of a Police Study. Motion with correction
passed with one abstention.
A motion to add “Treasurer Report” to the agenda was made by Ms. Rzasa, seconded by Mr. LaMay and was so VOTED unanimously.
Treasurer Report
Mr. Fish passed out his General Fund Operating Budgets Fiscal Year 2016/2017, July 30, 2016, the first report of the new fiscal year. He noted the usual expenditures and revenues and 100 Fund expenditures year to date. He added a last page to this report, General Fund Revenues for fiscal year 2016/2017 as of July 31, 2016. Mr. Fish’s entire report can be seen in the Treasurer’s Office.
He noted the hand-out of budget performance through July 31, 2016 from Ms. Palladino.
Mr. LaMay thanked Mr. Fish.
Finance Director
Ms. Palladino discussed the hand-out of the budget performance through July 31, 2016, as follows:
Budget Fiscal Year 2017
The general government budget for Fiscal Year (“FY”) 2017 presently stands at $15,644,049 up $16,431 due to appropriations, from the FY17 budget of $15,627,618 approved at the May 2016 budget referendum.
- FY 17 Budgetary Appropriations
To date in FY 17, appropriations of $16,431 include:
- $16,431 to reflect the finalization of the dispatcher’s collective bargain negotiations (5/16)
- Appropriations against the Municipal Reserve Fund – none
The balance of the MRF stands at $1,182,065.14 as of July 29, 2016.
FY 2017 budgeted capital outlays totaled $675,000, of which $605,000 has been transferred to various reserve accounts. The difference, $70,000 was not transferred as the projects earmarked for these funds has been identified and will be expensed at some point during this fiscal year. The balance of these reserves is noted below.
Municipal Reserve Fund |
FY 2016 Transfers |
Balance 7/29/2016 |
Capital Non- Recurring Budget |
$230,000 |
$767,065 |
Fire Apparatus |
155,000 |
315,000 |
Public Works |
60,000 |
100,000 |
Catastrophic Illness |
70,000 |
191,929 |
Retirement Payout |
40,000 |
37,705 |
Revaluation |
50,000 |
82,166 |
Total |
$605,000 |
$1,493,865 |
- Appropriations against the unassigned surplus funds – none
- Capital Expenditures FY 2017
Department |
Amount Budgeted |
Amount Used |
Balance |
Fire Department |
$35,000 |
$0 |
$35,000 |
Police Department |
$94,000 |
$0 |
$94,000 |
IT – Town |
$25,000 |
$0 |
$25,000 |
Public Works |
$315,000
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$0 |
$315,000
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Total |
$469,000.00 |
$0.00 |
$469,000.00 |
- Authorized Transfers – none
Fiscal Year 17 Budget Performance
Through July 31, 2016, one month or 8.3% of the budget equates to $1,303,671. Actual expenditures, which are running at 12%, are ahead of budget expectations due to lump sum payments made in July for the full fiscal year. Actual expenditures through July 31, 2016 for general government equate to $2,073,764 falling ahead of the one month, straight lined budget figures by $770,093. The budget lines that have expenditures in excess of 12% are attached. Most budget overages are explained by timing differences or seasonal activities. There are no line items that are projected to exceed their yearly budget at this time.
Fiscal Year 2017 vs. Fiscal Year 2016
The general government budget for FY 2016 was $15,258,527, or $385,522 less than FY17. When comparing the first month of FY16 to FY17, the current fiscal year’s budget is tracking slightly better at 12% versus 12.5% (rounded) versus this time last year.
Mr. LaMay thanked Ms. Palladino.
Discussion of Financial Software System:
Ms. Palladino discussed the Financial Software System Report as follows:
Financial Software System report: Accounting system discussion: Engaging the services of Sungard Kj-12 to provide an integrated government financial management and accounting system.
Ms. Palladino spoke about the memorandum asking the board of finance to consider hiring the firm of SunGard Financial Systems to provide integrated Governmental Financial Management and Accounting Software services (“software services”) for the Old Saybrook Town Hall (“OSTH”) and Board of Education (“BoE”). This recommendation comes forth after the assessment of the request for proposal (“RFP”) responses delivered in the fall of 2015; the advice of RFP consultant, Blum Shapiro; and in consultation with the Finance Department of the BoE.
The transition to the SunGard system would include both the OSTH and the BoE. The OSTH will be converted in phase I and the BoE would convert in phase II. The total cost of the one-time conversion fee will be about $80 thousand for each of the OSTH and BoE. This fee includes training, project management and third party vendor fees. This amount will be paid after each phase of the conversion. Further it was negotiated to have SunGard provide data conversion services (the transfer of data from the existing system to the new system) with no additional fee to the OSTH or BoE. The data conversion service will also reduce the typical time constraints, overtime expense and pressures on in-house staff. Over the long term, savings will offset the upfront conversion costs through a lower annual
maintenance fee for both the OSTH and the BoE, and the expenses saved by bringing payroll services for the OSTH in-house.
Background
By way of background, the OSTH and BOE currently use the SunGard Pentamation Phoenix General Accounting System Version 2.1.1.6 (“Phoenix”) provided by Sungard Financial Systems (“Sungard”). This system has been utilized for over 10 years and is currently maintained in-house. With regard to the Phoenix system, SunGard no longer actively markets this system as it has launched eFinancePLUS to target the municipal market.
OSTH has been outsourcing payroll through Paychex for several years, while the BOE uses the Phoenix payroll module to manage payroll in-house.
Software Search
The software search was initiated due to a variety of factors, including the use of an outdated version of SunGard’s software suite, and the desire to improve the efficiency of the existing financial infrastructure.
The firm of Blum Shapiro Consulting Group (“Blum Shapiro”) was retained in 2014 to assist the town with the software search. Blum Shapiro adequately performed these tasks working in concert with the Town, assisted in the development of a Request for Proposal (“RFP”), and facilitated on-site demonstrations of the RFP candidates.
During August 2015 the RFP was issued and two firms replied as a result of the software search: 1) Tyler Technologies with the Munis product; and 2) Sungard with the eFinancePLUS product.
Software Functionality
The vendors responded to an in-depth list of functions and features that not only support existing functionality, but also provide integrated solutions to other functions such as purchased orders, fixed assets and grant tracking. Both firms generally met all of the functions and features that were requested. In no instances, did the proposed software providers not cover the existing level of functionality that is present in Phoenix.
The OSTH presently does not use the budget, payroll or purchasing modules within Phoenix. General ledger, accounts payable and receivable processing and financial and year-end reporting are the main functions currently performed by the Phoenix system. The BoE has a more extensive use of the Phoenix system. Both vendors under consideration provided adequate solutions for the items outlined in the RFP.
Information Technology (“IT”) Support
One main difference between the two proposed vendors is the IT platform from which the system will be utilized. Munis presented two choices: Vendor hosted, a solution where the software is managed in-house with the support of the software vendor; and Service as a Software (“SaaS”), where software is licensed on a subscription basis and the vendor maintains the systems. The most cost effective proposal provided by Munis was the vendor hosted solution. Sungard proposed a SaaS solution with no other options. Therefore, when comparing the most cost effective solutions we compare the Munis vendor hosted to the SunGard SaaS. Munis SaaS solution was much more expensive than the Sungard proposal.
There are benefits and disadvantages of both IT solutions. With regard to the two proposals the Sungard SaaS system is more cost efficient over both the short and long term horizons.
The benefits of a SaaS solution include ongoing software support, integration to ensure access to the most up to date software available, data is secured through the resources of the software provider, and remote access. The downside of SaaS is the risk that the vendor goes out of business or increases annual fees significantly. These risks are mitigated by the fact that both vendors are well-known established software vendors with solid reputations and a long term commitment to this segment of the market. Fee increases may also be managed contractually.
With a hosted environment the town will have more control over the data and the ability to customize solutions as well as continued access to the system should the software provided go out of business, thereby allowing the mission critical system to run until such time as a replacement vendor is found.
Given the size and resources of the town the SaaS solution was preferred because of the significantly improved disaster recovery/business continuity solutions versus an on premises solution.
Payroll and Human Resource (“HR”) modules
At present the payroll for active and retirees is outsourced to Paychex (active payroll) and Advantage (retiree payroll) for the OSTH and utilized in house for the BOE. Paychex not only processes the weekly and monthly payrolls, but also produces the required quarterly federal W-2 and state 941 reports. At the end of the year, these companies also produce the annual 1099 forms.
The active payroll for the OSTH is about 150 to 160 checks per week, with an increase in seasonal flows during the summer up to approximately 200 checks. The weekly charge for payroll services is based on the amount of volume processed, averaging about $500 a week and $26,000 annually. Similarly the monthly pension payroll, which total 48, is priced according to volume. The payroll system is completely manual and all timesheets are input and uploaded to Paychex and Advantage.
Both vendors were able to replicate our payroll process, add a great deal of self-service options for the employee; and automate certain HR functions such as employee profiles, annual benefit elections, position tracking, and certification tracking.
At present payroll is a manually intensive process. Once automated, the ongoing maintenance will be decentralized to employees and their supervisors, thus freeing up accounting resources.
Benefits of a new software system
- Integrated systems – more efficient and accurate operating environment
- Ability to upgrade existing operating processes that will leverage off of the integrated systems.
- Improved financial reporting and tracking
- Disaster control improvement
- On line access for employees
- Automated payroll systems
- Addressed various audit findings
Proposed cost of system
SunGard proposed a two phased approached to conversion. Phase I will allow the OSTH to convert and the BoE will convert in phase II. In order to convert from our existing system to the new software, SunGard will charge professional, training and conversion fees. These expenses will cost the same for the OSTH and the BoE as each entity has its own database, general ledger set up and other reporting requirements. The proposed fee schedule is attached. The base professional fees are $69,222 for each entity or $138,444 for both. Optional fees and other expenses associated with travel are not included in this amount and will be determined on an as needed basis. However, a contingency of $30,000 should be added to allow for unanticipated conversion costs. This would bring the total conversion
cost to $168,444 for both entities. These amounts would be paid at the conclusion of each phase. The OSTH will go first with a projected conversion date of Jan 1, 2017. The BoE will target to convert within two years of this date.
Offsetting the conversion costs over the longer term will be a lower annual maintenance fee of $16,248 for the first year compared to approximately $21 thousand for both entities currently. It was negotiated that the fee will be reduced once the OSTH is converted even though the BoE does not convert until a later date. In addition, the OSTH will save about $30 thousand a year once payroll costs have been brought in house.
The annual costs associated with the existing systems are as follows:
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Proposed Annual Maintenance |
Existing Annual Maintenance |
Phoenix system annual maintenance OSTH |
$16,248 |
$ 6,000 |
Phoenix system annual maintenance BOE |
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$15,000 |
Paychex (active employee payroll) |
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$26,000 |
Advantage (retiree payroll) |
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$5,000 |
Total |
$16,248 |
$52,000 |
Conclusion
The SunGard system offers an enhanced financial platform that allows for the automation of many of the functions now done manually by the OSTH accounting department. In addition, the upfront costs of conversion will offset by lower annual maintenance fees and the reduction of expenses associated with bringing payroll in house. Therefore it appears prudent to move to the new system.
Mr. Stevenson inquired about fraud protection; foreign outsourcing; freeing up employees to which Mr. Fortuna replied that they can now tackle other projects that have been put on the back burner. He inquired about training to which Ms. Palladino replied that there will be about 5 people that will have training and then they will be a resource to others. She also noted the tutorials that employees can utilize. Mr. O’Brien inquired about a contract to which Ms. Palladino replied that there is a 3 year contract. If there is an increase on the BOE side, it was noted that it would come out of their budget.
Mr. LaMay thanked Ms. Paladino. After a short discussion and questions, the following motion was made:
A motion by Mr. Thorpe for the Board of Finance upon the recommendation of the Board of Selectmen, recommended to Town Meeting an appropriation of $170,000 to finance the engagement of Sungard services and purchase the Sungard K-12 integrated government financial management and accounting system; said funds to be paid from the capital non-recurring account, seconded by Ms. Lindley and was so VOTED unanimously.
Selectman Report
Mr. Fortuna reported on the following:
- Amtrak – Alternative 1 could impact Old Lyme and Old Saybrook
- Tree Warden is warning OS about Ash Trees needing treatment; Emerald Ash Borers
- Kohls Tax Appeal settled; credit to Kohls of $20/yr. starting 2014-15
- Phase I – Custom Marine completed
- New flooring at Teen Center at Park & Rec. Mr. Stevenson inquired if that was because of the roof leaking? No, just a very old and worn out floor
- Police Commission Study: Ad hoc committee make-up: 3 Police Commission members; Ms. Lindley and Mr. O’Nell from the Board of Finance; Selectman Fortuna; Chief Spera
- Bokum Road House; ZBA approved lot line descripton; house will be appraised and go to auction
Mr. LaMay thanked Mr. Fortuna.
Comments from the Chair
Mr. LaMay thanked everyone for attending and noted that he had no additional comments.
This meeting in its entirety was recorded on CD in Town Clerk’s office. It is also video taped and can be viewed on You Tube.
A motion to adjourn was made by Mr. Thorpe, seconded by Ms. Lindley at 8:16 p.m. and so VOTED unanimously.
Submitted,
Gerri Lewis, Clerk
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