06/04/1980 - City Council Finance Committee r
MEMO TO: CITY ADMINISTRATOR HEDGES
FROM: FINANCE DIRECTOR VAN OVERBEKE
DATE: JUNE 4, 1980
SUBJECT: DATA PROCESSING
At your request, I have prepared this memo outlining how our present accounting
machine compares to available electronic data processing equipment.
As background information, a 1978 state law requires cities with populations
of 2,500 and over to report financial position and results of operations in
accordance with generally accepted accounting principles. Previously, cities
were required to report only cash receipts and disbursements for their fiscal
period and any outstanding debt obligations at the end of the period. Our audi-
tors are now adjusting cash receipts and disbursements to meet these reporting
requirements. This is already relatively expensive and inefficient and will
get worse. The records the City maintains will be materially different from
the reports that are issued after audit due to all of the required adjustments
and the City will have little chance to complete its own reports. With our
present system, we are unable to determine financial position or results of
operations for any of the City' s funds. As an example, we can usually determine
how much cash we have on hand but not what a special assessment receivable
balance is or how much money we have in escrow deposits or how much money we
owe.
The system we have could be upgraded to accomplish some of what needs to be
done but would be a very temporary measure at best. It is presently being uti-
lized near capacity during an 8 hour day. Even if it could be technically accom-
plished, any additional posting or use would probably require overtime or shifts
or some such thing for our personnel. The machine is adequate for utility bil-
ling since the requirements have not changed significantly. Utility billing
has changed in volume which impacts the time constraint but not necessarily
the capability of the machine. Other machines would probably be more efficient
for utility billing but I feel this should be a later consideration.
Following are some specific areas where the present accounting machine is in-
adequate. My information in the electroni _ data processing is derived from
my experience with LOGIS, however, these capabilities would be a requirement
of any new system.
ACCOUNTING MACHINE ELECTRONIC DATA PROCESSING
1. Cash receipts and disbursements Complete trial balances and balance
only. sheets for all funds allowing one to
determine financial position at a parti-
cular point in time.
Data Processing Memo
June 4, 1980
Page Two
ACCOUNTING MACHINE ELECTONIC DATA PROCESSING
2. Reports of operations for the Operating statements allowing for review
general fund and utility fund of current operations for all funds
only as well as receipts for along with revenue reports for all funds.
these two funds only.
3. No reports summarizing activity. Reports both by transaction grouping
and by account listing for any period's
activity.
4. Cannot get individual department All operations can be summarized and
totals from operations, e.g. , reported by individual departments.
Mayor and Council, Elections,
Financial Administration, Auditing,
Engineering, Planning and Zoning,
and General Governmental Buildings
are all combined.
5. All balance sheet accounts Asset and liability entries can be made
(except for some payroll with- directly to the balance sheets, conse-
holding) such as escrow deposits quently operating statements reflect
have to be run through cash re- only actual department activity.
ceipts and disbursements, e.g. ,
Meadowlands park contributions
of $400 per lot.
6. No ability to do any program Costs can be split to appropriate de-
accounting, e.g. , split salaries. partments and/or activities.
It is now cumbersome even to
allocate payroll to departments.
7. No ability to reflect encumbrances, Can encumber material purchase commit-
i.e. , to show budget obligations ments as the obligations are incurred.
before the bills are actually This accommodates greater budget re-
paid. porting and control.
8. Check lists and at least one- Only the checks betwen claim lists would
half of the checks are manually need to be manually typed. Check lists
typed - this batch of checks and checks would be generated automati-
needs to be redone on the ac- cally after inputting the information.
counting machine to update the
accounting records. All activity is in the correct accounting
month.
All payments to any vendor are automati-
cally summarized and one check is written.
All accounts are displayed on the check
register.
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Data Processing Memo
June 4, 1980
Page Three
ACCOUNTING MACHINE ELECTRONIC DATA PROCESSING
9. Payroll expenditures have to be Financial records are automatically
manually posted to the accounting updated from payroll transactions.
records which results in a great
deal of duplication.
10. Payroll leave time records have Leave time records are calculated auto-
to be recorded and passed out matically and the informtion is included
to employees manually. on payroll checks, i.e. , accrual, use
and balance.
11. No practical method to maintain Will be done as part of the balance
cash or investment balances or sheets.
records.
12. All payroll/personnel analysis Can be programmed and completed by users.
must be done manually, e.g. ,
assembling information for in-
surance, etc.
13. We are not able to provide Reports can be summarized and focus
summarized information to top on exceptions and out-of-line conditions,
management and to elected Users at different levels can receive
officials. relevant reports.
14. No practical way to maintain Property record controls can be set
property records for control up.
or budgeting purposes.
15. No practical method to maintain Items can be maintained in inventory
inventories and to charge user and charged to individual departments
departments as costs are incurred when appropriate.
e.g. , gasoline, postage.
I am sure that these fifteen items only scratch the surface of potential improve-
ments; however, they do illustrate the necessity of taking some positive action.
I have discussed the upgrading of our present system with the firm of Creative
Data Services which presently handles the programming for our Phillips. They
do not really appear to understand municipal accounting to the point where they
can differentiate between what we are presently doing and what needs to be done;
consequently, there is no cost estimate. I was referred to Mr. Bob Voto who
is the independent auditor for the City of Little Canada where Creative Data
Service is in the process of installing modified programs for accrual and modi-
fied accrual accounting onto a machine such as ours. Mr. Voto feels that the
Data Processing Memo
June 4, 1980
Page Four
system will be adequate for the needs of Little Canada. However, Little Canada
is a city of 7,100 people with approximately twelve employees and no police or
fire department so I don't think the situation is germane to Eagan. I have
also discussed our situation with Mr. Dave MacGillivary, the former Finance
Director for the City of Inver Grove Heights, which also has a Phillips machine
programmed by Creative Data Services. They were using slightly more system
capabilities than Eagan has been; however, without a great deal more study,
it is not possible to determine any kind of cost/benefit relationship.
An additional consideration would be the upgrading of the machine itself versus
the modifying of the programs. This would involve a change from a 600 word
to a 1000 word capacity memory. This is estimated to cost approximately $3000.
We are also dealing with a machine that is no longer being manufactured but
is available only on the used market.
It is my feeling that with these modifications and the addition of a staff ac-
countant, we could address most of the fifteen aeas through manual processing.
A staff accountant would involve an annual personnel cost of approximately
$20,000. My opinion is that processing on other equipment and using our present
personnel level in a more efficient manner would make better use of the City's
resources.
Respectfully submitted,
E. J. VanOverbeke