KPMGs Core Services Review A nice watch?
Wednesday, July 10, 2013 @ 3:45 AM
By Peter Ewart
The results of the City of Prince George Core Services Review, conducted by the global consulting firm KPMG, brings to mind that old saying “A consultant is someone who borrows your watch to tell you the time, and then keeps your watch.” In this case, KPMG gets to keep over $300,000 for its work, a very high figure compared to core services reviews conducted in other municipalities (see previous article).
Of course, Mayor Green and her supporters on Council will likely claim to high heavens that hiring KPMG was a wise decision. But is this really the case? As Councillor Frank Everitt pointed out in Council’s special meeting on July 8th, city staff has had to re-write KPMG’s report. The new report, written by city staff, is called the “Core Services Review Implementation Plan.”
Shipping in high-priced consultants from Toronto and elsewhere can pose particular problems. One problem is that these consultants don’t have a firm handle on local or even provincial conditions. And thus it happens that KPMG made at least 5 recommendations which are impossible to enact because (as noted in the Implementation Plan) the city “has no legislated authority” to do so. How could KPMG have been so oblivious to municipal legislation and regulation in BC? And shouldn’t it have checked with someone somewhere before putting such wrong-headed recommendations forward?
Furthermore, in the Implementation Plan, the city administration proposes that a large number of KPMG’s recommendations be mothballed under the classifications of “take no further action” or “continue with current practices.”
In addition, it appears that city administration has had to dramatically rework the costing in a number of KPMG’s original recommendations, suggesting that KPMG’s original figures were off or, in some cases, could not be relied upon at all. Another 4 new recommendations were somehow missed by KPMG and have since been added by city staff (amounting to an estimated $415,000 in revenue / savings).
What gets quite bizarre is that it appears that, in the relations between Council’s Finance and Audit Committee and KPMG, the right hand didn’t know what the left was doing. For example, in its final report issued in early November of 2012, KPMG recommended an increase in water and sewer rates for residents that would capture between $500,000 and $1 million for city coffers. Yet, strangely, in the same month, just a few days later, Cameron Stolz, Chair of the Finance and Audit Committee, submitted a report to Council’s Committee of the Whole proposing a substantially larger increase in sewer and water rates (this proposal was based on detailed research submitted earlier to the Finance and Audit Committee on October 15th by the city administration).
In his report, Stolz claimed that his Committee had worked over the previous year “to grapple with the compounding effect of the underfunding of our core infrastructure.” He stated that, over the year, “Council has unanimously repeated and reinforced the message that our infrastructure gap needs to be addressed.” Almost dismissively as an afterthought, he noted that the message “was also stated” in KPMG’s Core Services Review.
In the staff-written Core Services Review Implementation Plan, the final figure proposed for water and sewer rate increases was $5,050,000 annually, a huge difference compared to KPMG`s recommendation of just $500,000 to $1 million. Clearly, Stolz’s push for dramatically higher rate increases for home and property owners prevailed.
But why the variance? Was there a communication problem here? Or was someone grandstanding? We don’t know. However, the question remains that, if the Finance and Audit Committee and the administration could come up with a detailed proposal for water and sewer rate increases, why was KPMG kept stumbling around in the dark while collecting fat fees to study the same issue?
This example raises the question as to why the City simply did not conduct the Core Services Review in-house (as Abbotsford City Council has recently done), save a pile of money, and build up internal capacity. The fact is that city staff spent a lot of time and resources digging up and researching the information that KPMG used in its report. In the final analysis, why were the outside KPMG consultants needed at all?
As the Core Services Review Implementation Plan reveals, most of the estimated revenue / savings arising out of the Core Services Review will come from increased user fees for the public (*see note below), whether these be recreation fees, bus fares, homeowner utility charges, downtown parking, and so on.
However, as everyone knows, raising user fees is nothing new for City Council. What the whole Core Services Review issue boils down to is that KPMG got paid over $300,000 to tell City Council to do something it has already been doing for years.
Nice work (and a nice watch) if you can get it.
* * *
*Note: the “one-off” land sales of $7,265,000 should not be counted in the final figure of revenue / savings as these were actually initiated by the city before the Core Services Review even began.
Peter Ewart is a columnist and writer based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca
Comments
A core services review can be many things. Some are internal and some are external.
They are audits. In this case audits of how a municipality operates and how those operations compare to other communities.
In any such external audit, the staff workload does not change substantially from a proper internal audit. That is a given. Anyone who thinks differently does not understand such audits.
It is extremely valid to make comparisons with other cities, especially if they are done for specific operations selected from sample cities with similar operations. All the operations do not have to be from a single city.
Such audits are much easier to conduct in provinces which already have municipal auditor generals who have done some of the work already over the past 10 years or so. BC has no such data readily available at the moment but it is starting to be assembled and reworked as we speak/write. In Ontario it would be much easier to carry on such a review.
So, knowing that staff would have to do substantial work, it may have been a good idea to hire an external auditor who would instruct staff how to assemble the information required, then walk away till the work has been done for the next phase.
In the meantime, the auditors could make sure they have their people assembled who know something about BC, BC communities and how they function to assemble a number of operational functions which would be looked at and could be used for comparison. Once that is done, write the first draft of the report, identify suggested operations improvements for better quality and/or less expensive operations. Identify the degree of certainty and those areas which would need more advice from professionals who specialize in those areas.
Then go to the various internal and external groups to get feedback and adjust the report accordingly.
I would not trust an internal review by itself. The purposes of internal reviews and external reviews are substantially different.
In our case, we obviously had many newbies, especially on Council, as well as some on staff. We have been watching a steep learning curve unfold in front of us and are still doing so.
If PG were serious about auditing its operations, they would create an independent Municipal Auditor’s office such as is done in Ontario and other jurisdictions in North America.
Here is Oshawa’s page.http://www.oshawa.ca/cit_hall/auditor.asp
Read some of the public reports. We have no such reports and we have no such transparency.
City Council no longer owns the Core review, in fact, IMHO City administration took over and developed their own CSR and implementation plan with new categories and dollar figures, customizing it to suit their own agenda and not council’s. It was administration’s new version that was being sold to council on Monday not KPMG’s. Council, along with users groups and the whole community didn’t see this coming.
The Mayors attempt to find some reductions in costs to running this City seem to have been nothing more than a pipe dream.
So far I have seen nothing that will reduce taxes or costs. In fact when it comes to operating costs, I see nothing other than many areas where taxes or user fees will be increased.
License’s for suites, user fee’s, water and sewer increases, parking re-instated, business license increases, bus fares, etc; the list goes on.
Where are the decreases. Did not the Mayor run on the claim that she would produce an across the board 10% reduction in costs to run the City????
The above is just a conglomeration of increases in taxes and service fee’s that could have been implemented by any accountant on the payroll at City Hall.
Why are we spending all this time and effort to implement increases in costs, when the initial idea was to decrease costs??
How did we get sidetracked. Who is trying to maintain the status quo at any cost. Who has looked at the impact of these increases on the average taxpayer, and their ability to pay??
Is there more to come?? When will we see some SIGNIFICANT reduction in operating costs at City Hall.?
Once this review is complete, will the City then give everyone a raise in salaries and benefits. Is this what the so called saved money will be used for??
Are we getting it in the ear, so that the high paid City employee’s, which include Management, Staff, Protection Services, etc; etc; can continue to live the life of Riley while taxpayers eat cake??
“Who has looked at the impact of these increases on the average taxpayer, and their ability to pay??”
Who cares? I can easily take the attitude that many on here take who say if you do not like it, move somewhere else.
In this case, if one cannot afford the home one lived in when they were younger ad working, then sell and buy a smaller place or rent. Allow someone to live in the place who can afford it.
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âWhen will we see some SIGNIFICANT reduction in operating costs at City Hall.?â
Never. The only thing that may happen is that if there are some less expensive ways of providing the same level of service as now, that they might give as a few years of no tax increase. The other thing that may happen is that the city may actually have some significant growth for a few years and the increase in taxes without an increase in the Cityâs development cost will stop increases for a few years.
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âHow did we get sidetrackedâ
I do not think we did. We did not have a track to start with so sidetracking is impossible. Some in Administration MAY have had some knowledge, but certainly not on Council. No one showed me any outward sign of having the faintest clue, especially those who thought that it could be done for considerably less.
Speaking of tracks, I do not think we are anywhere near on the track that a city like Oshawa and many other cities are on that have an internal department which audits for the things that an external financial auditor does not audit for is on. That department reports directly to Council, NOT to City administration. Until we have that department here, we will not be serious about auditing what we do, how we do it and how well we do it and are totally transparent. The reports will be open to Council, not in private session, and thus will be reports to the taxpayers.
When that comes about, we can have many conversations. Until then, we have controlled conversations.
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Get used to the salary levels. They are what they are and they will not change. They are not unique to this City. They are certainly not unique to large corporations. The City is a relatively large corporation with a total operating and capital budget around $200 million/year and a staff in the 700+ range.
From an Opinion 250 story on Mar 26/2012 about awarding the core review contract to kpmg.
“Councillor Skakun asked if the City is going to get value for the dollars being spent . The Mayor was quick to respond âAbsolutely we will get value for every dollar on this projectâ says Mayor Green”
gus, are you nuts?
Canfor is a large corporation and certainly doesn’t pay their janitors $26 per hour starting wage? The wages are way out of line compared to private companies/industry and those people create their own revenue instead of relying on the taxpayers to fund their businesses.
The only place you find wages and benefits like the City of Prince George has is at taxpayer funded organizations e.g. provincial and federal govt.
Staff at the City of PG could easily take a $4 per hour decrease and still be making good money. $22 per hour to clean buildings is a good wage.
How many professionals work at Canfor that make more than $75,000/year and more than $100,000/year.
I bet you bottom dollar that our good Councillor is in the latter group or close to it.
Who cares whether so called janitors make $20 or $26 or $30/hour? I care about what they do.
When I was a student, my dad was an accountant at EB Eddy in Ottawa. The kids of employees got first chance at goo paying union jobs at the fine paper mill. My friend was a “janitor” …. he used to brag about how he can disappear for 4 hours or much of the day and no one was the wiser.
Working at the palette factory was a bit harder. I did tha for a year.
I also had a “sit around wait till the paper breaks” job or till the roll had to be changed. Six of us ….. and I was kidded by the workers when I was reading text books while they were reading girlie magazines.
How do I know the level of salaries at Canfor? – friends as well as working for Census Canada and processing data.
Where is your info from?
[ur]http://www.usw1-424.ca/uploads/Canfor%20Labour%20Agreement.pdf[/url]
That is Canfor’s collective agreement. Try finding the word janitor in there.
The excluded jobs are not in there, of course. When you look at the City jobs, the highest paid ones are excluded.
When you look at provincial ad federal jobs, most of the professionals are in unions and only upper management jobs are excluded.
Compare firemen jobs in Canfor and the City and you will see a large difference. Don’t worry about janitors so much.
http://www.usw1-424.ca/uploads/Canfor%20Labour%20Agreement.pdf
I know people who work at Canfor too and their janitors aren’t making $26 an hour to start (or similar positions) AND even if they were, Canfor is a private (publicly traded) company.
I happen to know that Canfor professionals took a large salary decrease for a number of years when things were bad. Have you seen any of the City employees doing that?
“even if they were, Canfor is a private (publicly traded) company”
And this matters how?
People get paid for the work they do and the credentials they bring with them, including experience. For a long time government workers were getting paid less than those working for private companies.
That has turned around over the years and, even though I am out of the workforce now I have experienced both types of employment situations and know that the amount of work and knowledge I put into my positions did not depend on whether I was in a union or excluded, in a public organization or a private organization.
The CEO of Canfor was paid $550k in 2012 not counting the STIPs and LTIPs the other named execs were all in the $300k range, to run a company with a market cap of $2.6 billion. Not sure what the local managers earn.
One main difference is that the above are accountable to the shareholders of the company while the mandarins who reside on Patricia Bvld are seemingly accountable to no one.
BTW I would suspect that a majority of the janitorial work is contracted out but if a union member is assigned to do this work he would be paid entry level or base rate depending on how long he has been with the company.
It’s useless to compare public wages and salaries to those in the private sector. It’s like comparing apples to oranges or diamonds to coals.
A private company has to show profits by competing with others by having a better product, a higher quality and a better price, overall. If the customers don’t buy in spite of all the above being in place efficiencies have to be improved, wages and salaries controlled, etc. If that isn’t done the company is in trouble and may not survive in the long run.
A government (federal, provincial, municipal) presumably does its best to provide decent service and value for the money for what is basically a captive customer base. No real competition. What is the incentive to improve? If things don’t add up a government raises fees and taxes to cover a shortfall. It always survives.
Therefore a comparison doesn’t accomplish a lot. There is a lot of finger pointing and calls for lean and mean. Entering into the public service provides certain benefits. Working in private industry often may be more rewarding but it certainly lacks a lot of security which is taken for granted elsewhere.
As the administrative manure gets thicker at the Mayors farm, the smell of self destruction gets stronger. The farmhands (The I Heart PG Citizens)work harder and harder to ask for the public’s assistance to save their farm.
The neighborhood begins to complain about the stench, and more and more of them begin to trickle in to complain. With their Children and their future at stake, the message becomes stronger and stronger that they actually like their farm. But the manure continues to get dumped, and the stink gets worse everyday.
Rather than asking the experienced farmhands to share their experiences to resolve the stench problem, the Princess of the Lavender Candle Shop who currently manages the farm points the finger at all the farmhands. They are now politely pointing a finger back.
If the Princess had stood up at the beginning and engaged the farmhands, rather than asking her accountant for a solution, this mess would have been cleaned up long ago, and would have not gobbled up well over a million dollars in time and wasted consultant reports.
No one really wants to leave the farm, and they have no real problem covering the costs of maintaining the farm; however, they all know that manure smells just like manure. The best solution right now is to melt down the Lavender Princess and enjoy the aroma.
Nicely done!!!! :-)
If you have/had children you must enjoy reading bedtime stories to them.
“Unless someone like you cares a whole awful lot,
Nothing is going to get better.
It’s not.â
â Dr. Seuss, The Lorax
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âI have heard there are troubles of more than one kind.
Some come from ahead and some come from behind.
But I’ve bought a big bat. I’m all ready you see.
Now my troubles are going to have troubles with me!â
â Dr. Seuss
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