Sometimes, the best advice you can get is the advice you least want to hear.
While it may be difficult to listen to someone catalogue each and every shortcoming, the benefits of candour and honest evaluation far outweigh any hurt feelings.
Such was the case at Oro-Medonte Township’s recent council meeting when KPMG, an independent firm that provides audit, tax and advisory services, presented its review of the township’s finance services.
KPMG focused on four specific objectives:
- assess and provide recommendations on the organizational structure of the finance department
- identify any gaps in staffing levels and associated skill sets required with consideration given to addressing capacity constraints over a period of up to five years
- review and recommend the township’s finance-related policies and financial-planning framework, as well as identify any gaps in documented policies
- review and provide recommendations to address the implementation issues with the new Enterprise Resource Planning (ERP) system.
“These risks which we identified in our assessments of the township’s financial department are found in many peer organizations across the province,” Bruce Peever, a partner with KPMG, said during his presentation. “These are common issues, common risks that municipalities are facing these days because of increased government regulation and the lack of fully trained staff to address the requirements of the municipality’s finance operations.”
According to the presentation, Oro-Medonte is facing six key risks:
- regulatory compliance risk: the inability to complete annual financial audits and to meet legislative reporting deadlines
- budgetary risk: the lack of readily available variance data can lead the township to incur unexpected expenses or failure to anticipate revenue shortfalls
- political/reputational risk: the lack of transparency of municipal finances leading to public distrust and reputational damage
- financial controls and operational risk: risks associated with day-to-day operations, such as errors in financial reporting, data breaches, or system failures are not timely prevented or detected
- business continuity risks: the lack of documented policies and procedures leading to key-person dependency to perform key financial duties with increased risks of operational disruptions or a lack of checks and balances
- risk of insufficient staffing or training: staff frustration leading to high turnover, insufficient support and training leading to errors and operational inefficiencies.
Additionally, Peever addressed what he called “the elephant in the room” — the township’s ERP project, which helps the municipality manage its day-to-day operations.
According to Peever, there were three key findings:
- the ERP project authority and responsibilities were not clear
- the ERP implementation steps were not fully planned or executed
- the ERP vendor communication and support was not consistent or timely.
“Again, this is common with municipalities when they go to implement an ERP system,” Peever said. “What makes it much more difficult for a municipality such as Oro-Medonte is that you don’t have the depth or the capacity to quickly recover if these issues merge in the implementation of an ERP system.”
To address the challenges, KPMG provided six recommendations:
- refresh the finance department’s organizational structure: update job descriptions, clarify responsibilities; hire new positions to balance staff capacity and service delivery needs and adjust structure to two teams, each responsible for a specific portfolio of financial activities
- refine financial processes and workflows: apply Lean Six Sigma to streamline financial processes and workflows to increase efficiency and document standard operating procedures to promote consistent and accurate processing of financial data
- enhance staff skills: provide staff training on system functionalities, workflows, and operating procedures and provide staff with recurring performance feedback and evaluations
- formalize IT governance and project delivery framework to complete ERP implementation
- establish a long-term financial plan: adopt a financial principles document to guide financial decision making; formalize debt management, reserves, investment, capital financing, and procurement policies; develop a long-term financial plan
- streamline customer service review and streamline the township’s customer service model as part of service delivery.
According to Shannon Johnson, Oro-Medonte’s chief financial officer, township staff are recommending a revised structure for the department that aligns with KPMG’s recommendations and supports the municipality's needs with a specialized focus on its revenue streams, risk management and procurement.
“The new structure includes two new permanent roles consistent with KPMG’s recommendation for three new roles and a reorganization and conversion of two existing positions in the department,” Johnson said.
The two new roles are a supervisor of accounting and risk management. The other new role is for a financial analyst.
Additionally, there will be a reorganization of the existing permanent tax and revenue analyst role into supervisor of taxation and revenue. The existing contract asset management analyst role will be converted into a permanent position to prioritize capital asset management and meet legislative requirements.
“Together, these updates will balance workloads, improve accountability and ensure continuity in leadership,” Johnson said. “When combined with the improvements to the financial systems and processes, this new structure will enable the finance department to address the growing needs of the community and meet the legislative requirements.”
The cost of the changes is about $285,000.
