Florida Department of Financial Services Uniform Chart of Accounts Cost Estimate Report December 23, 2013 kpmg.com
Table of Contents I. Executive Summary 2 A. Background and Purpose 2 B. Scope and Approach 2 C. Survey Results 5 II. Background and Purpose 9 A. History 9 B. Objectives 9 III. Scope and Approach 10 A. Identify Reporting Entities 10 B. Methodology 11 C. Communication 19 IV. Survey Results 21 A. Local Government Entities Water Management Districts, Cities and Municipalities, Counties, and Special Districts 21 B. Education Entities Colleges, Universities and School Districts 31 C. State of Florida Department of Financial Services 37 D. Transmission of General Ledger Data to Department of Financial Services 40 The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.
I. Executive Summary A. BACKGROUND AND PURPOSE The 2011 State of Florida (State) Legislature passed Senate Bill 1292 requiring that a mechanism be provided for obtaining detailed, uniform reporting of government financial information to promote accountability and transparency in the use of public funds. To accomplish uniform reporting, Chapter 215.89, Florida Statutes requires the State s Chief Financial Officer (CFO) to propose a Draft Uniform Chart of Accounts (UCOA) to establish uniform reporting requirements for all units of the government that include state agencies, local governments, educational entities and entities of higher education (collectively known as Reporting Entities). The Florida Department of Financial Services (DFS), led by the CFO, proposed a Draft UCOA to meet the legislative requirements. By January 15, 2014, the CFO is required to present the UCOA to the Governor, the President of the Senate, and the Speaker of the House of Representatives. In addition to the UCOA, the CFO was tasked with identifying the estimated statewide cost impact for the UCOA adoption and implementation. DFS engaged KPMG, LLP (KPMG) to determine the statewide cost impact of a UCOA adoption and implementation, which requires the collection and validation of cost estimates from the Reporting Entities. B. SCOPE AND APPROACH KPMG s approach included three primary workstreams: Survey Development: Utilized Key Survey technology to develop an electronic survey for more than 2,271 Reporting Entities. Developed a Survey Template designed to gather the required financial information and cost estimates from the Reporting Entities in a cost-efficient manner. Data Collection: Monitored the survey collection process and provided reports on response rates, reporting entity completion rates, pending incomplete surveys, and dates and times of completions. Data Analysis and Validation: Analyzed and validated cost estimate data as received from Reporting Entities during the survey process. For purposes of this project, there are 2,271 Reporting Entities responding to the survey (DFS represented 35 state agencies in a single survey response resulting in 2,305 Reporting Entities) which can be logically separated into three Reporting Entity Types and eight Reporting Entity Categories: Local Government 2,158 local governments consisting of cities and municipalities, counties, special districts, and water management districts Education Organizations 112 education organizations consisting of colleges, universities, and school districts State Agencies 35 state agencies represented by DFS in 1 survey B-1 Survey Approach KPMG developed a web-based survey tool to administer the electronic survey for the 2,271 Reporting Entities. The survey tool was delivered by email to the Reporting Entities, and was also accessible through a web-link on DFS Chart of Accounts Project website. KPMG utilized Key Survey technology to administer the survey to the Reporting Entities. Key Survey provides a robust, sophisticated platform with fully customizable solutions and unique functionality. I. Executive Summary 2
KPMG designed the survey to capture Reporting Entity cost estimate information through numerous multiple choice questions, pre-loaded lists, and open response sections. The survey also contained open response sections for Reporting Entities to provide additional details on cost assumptions or general commentary on complying with the UCOA. B-2 Survey Communication KPMG maintained extensive communication with DFS and the Reporting Entities to enhance survey awareness and understanding. KPMG conducted the following communication activities related to the survey: UCOA Project Website KPMG assisted DFS in adding project-related communication to DFS Chart of Accounts Project website. Communication items included an overview of the UCOA Cost Estimate project, anticipated frequently asked questions (FAQ s), as well as contact information for key DFS personnel. Notification KPMG s communications team assisted DFS in sending multiple email notifications to the Reporting Entities communicating the survey timeline, contact information and link to the survey tool. KPMG attached a link to FAQ s to the email distribution to assist the Reporting Entities in completing the survey. For entities that DFS did not have an email address, DFS sent a letter notifying the Reporting Entities of the survey process. Other notifications sent to the Reporting Entities included an initial survey awareness email sent prior to the survey launch, a survey launch email, and multiple survey completion follow-up reminder emails. Government Support Organizations KPMG worked with DFS and the Government Support Organizations to draft content to be incorporated into newsletters sent by the Government Support Organizations to the Reporting Entities. The Government Service Organizations included Florida Government Finance Officers Association (FGFOA), and the Florida Association of Court Clerks and Comptrollers (FACC). Newsletter content included general information about the UCOA Cost Estimate project, key project timeframes, DFS contact information, and web-link to the DFS Chart of Accounts Project website. Webcasts KPMG worked with DFS to coordinate and conduct three webcasts for the Reporting Entities to provide information about the project and a walk through of the survey example to assist entities in completing the cost estimate survey. The webcast also provided a forum for questions and answers. Each webcast was designed with 30 minutes of prepared DFS and KPMG remarks, and allowed 30 minutes for a questions and answers. More than 500 unique log-ons joined the webcasts. Conference Presentations DFS presented several presentations during the survey period. B-3 Survey Pilot and Execution KPMG conducted a survey pilot to test the survey process with identified Reporting Entities. KPMG piloted the survey with eight Reporting Entities representing all of the entity categories: city and municipality, county, special district, water management district, college, university and school district. KPMG provided a one-week period for the eight pilot Reporting Entities to complete the survey. After the oneweek pilot survey period, KPMG conducted a teleconference with each of the eight entities to obtain feedback on the survey tool regarding the overall survey experience, functionality, completion time, any issues encountered, and suggestions. KPMG received positive feedback with few recommendations to enhance clarity of certain questions. Based on the feedback from the pilot survey, KPMG adjusted certain survey questions to provide additional clarity, and streamlined certain questions to remove duplication. After completing the survey pilot, KPMG launched the survey process. KPMG assisted DFS in distributing an email notification to the Reporting Entities communicating the survey timeline (open for six weeks), contact information and link to the survey tool. A link to FAQ s related to the survey was included in the email that guided the Reporting Entities in completing the survey. As the Reporting Entities completed the survey, the data was housed on a secure server. The KPMG team consistently monitored the survey collection process and provided weekly reports to DFS on response rates, I. Executive Summary 3
reporting entity completion rates, and pending incomplete surveys. Surveys were also received from several Component Units (CU s) and Direct Support Organizations (DSO s) that were not originally included in the initial notification. B-4 Survey Responses KPMG received 600 completed surveys 474 surveys from primary governments and 126 surveys from related parties including CU s, DSO s, and County Constitutional officers. KPMG s targeted response rate was15%, and achieved an actual response rate of 21%. The following graph shows the response rate for each of the eight Reporting Entity Categories based on the number of reporting entities in each group. The average response rate is 21%, due principally because of a 10% response rate of Special Districts. All other Categories had a response rate of at least 40%, with Colleges, Universities and School District response rates above 67%. 100% 80% 67% Response Rate 100% 86% 72% 100% Exhibit I-1 60% 40% 20% 43% 10% 40% 21% 0% B-5 Data Analysis and Validation KPMG conducted a preliminary analysis of the estimated cost for each of the 8 Reporting Entity Categories identified in the graph above. KPMG received responses from all entities for two categories (Universities and State Government). KPMG received responses from 2 of the 5 Water Management Districts and 24 of the 28 Colleges. For these four Categories, it was not necessary to stratify the populations to extrapolate an aggregate cost (see Section III.B.3 for further description on population strata). For the remaining four Categories (Cities and Municipalities, Counties, Special Districts, and School Districts), KPMG stratified the populations into either 3 or 4 strata to enable extrapolation by Reporting Entity Categories. The following table shows each Reporting Entity Type, Reporting Entity Category and associated strata. I. Executive Summary 4
Reporting Entity Type Reporting Entity Category Florida Department of Financial Services Applicable Strata Exhibit I-2 Local Government Cities and Municipalities 4 layers organized by city/municipality size Counties 3 layers organized by county size Special Districts 3 layers organized by revenue size Water Management Districts N/A Education Colleges N/A Organizations Universities N/A School Districts 3 layers organized by county size State Government DFS N/A KPMG organized the survey results based on Reporting Entity Type, Reporting Entity Category and then further organized by strata within each Reporting Entity Category to further group survey responses with similar characteristics (such as population or revenue). KPMG analyzed the survey results to determine whether individual survey responses were outliers. KPMG used statistical analysis to summarize and analyze the cost estimate data. KPMG calculated a normal distribution of survey results and reviewed data outside of the first standard deviation of the mean within each strata. KPMG reviewed source data from the Reporting Entity s survey to identify key factors (reported hours or rates) potentially contributing to cost estimates outside the normal distribution. KPMG further attempted to contact the entity to confirm or adjust the reported estimates within the response. C. SURVEY RESULTS C-1 Uniform Chart of Accounts Cost Estimate Calculation The cost for an entity to comply with the UCOA requirements was calculated directly from the entity s survey response. Each Reporting Entity provided: A data transmission method from one of three options: o Manual crosswalk o Technology crosswalk o System modification The type of resources they intend to use to develop the transmission method from one of three options: o Internal resources o Third party resources o Combination of both internal and third party resources Each Reporting Entity also provided information detailing the cost to comply with reporting for: Monthly operating costs for reporting for revenues and expenditure information Annual operating costs for reporting for balance sheet information Total operating and capital costs for transition Responses were analyzed, reviewed by tier, and extrapolated to the population to calculate estimates for the total population. The cost estimate includes monthly recurring costs, additional annual recurring costs, and one time transition costs. I. Executive Summary 5
C-2 Uniform Chart of Accounts Cost Estimate The estimated costs to implement the UCOA are shown in the exhibits below. Cities and Municipalities, School Districts and Special Districts had transition costs higher than other entities. The estimated recurring and transition costs for Local Government Entities are: Uniform Chart of Accounts Implementation Annual Cost Estimate Detail by Type of Local Government Entity Exhibit I-3 Water Cities and Special Management Municipalities Counties Districts Districts Total Monthly Costs $ 951,382 $ 412,781 $ 1,921,478 $ 1,784 $ 3,287,424 Annualized Monthly Costs $ 11,416,578 $ 4,953,368 $ 23,057,736 $ 21,408 $ 39,449,090 Annual Costs $ 2,583,363 $ 2,383,990 $ 6,394,302 $ 1,784 $ 11,363,439 Total Recurring Costs $ 13,999,942 $ 7,337,358 $ 29,452,038 $ 23,192 $ 50,812,530 Transition Costs $ 13,786,605 $ 5,405,450 $ 16,885,569 $ 56,582 $ 36,134,206 The estimated recurring and transition costs for Educational Entities are: Uniform Chart of Accounts Implementation Annual and Five Year Cost Estimate Detail by Type of Education Entity Exhibit I-4 School Colleges Universities Districts Total Monthly Costs $ 127,452 $ 123,237 $ 295,670 $ 546,358 Annualized Monthly Costs $ 1,529,423 $ 1,478,841 $ 3,548,036 $ 6,556,300 Annual Costs $ 395,834 $ 197,384 $ 2,007,004 $ 2,600,221 Total Recurring Costs $ 1,925,257 $ 1,676,225 $ 5,555,040 $ 9,156,521 Transition Costs $ 3,008,894 $ 1,840,611 $ 31,505,036 $ 36,354,541 I. Executive Summary 6
The estimated recurring and transition costs for the State are: Uniform Chart of Accounts Implementation Annual Cost Estimate Detail for DFS Exhibit I-5 State Agency LOGER Costs Costs Total Monthly Costs $ 786 $ 1,748 $ 2,534 Annualized Monthly Costs $ 9,432 $ 20,976 $ 30,408 Annual Costs $ 1,787 $ 40,320 $ 42,107 Total Recurring Costs $ 11,219 $ 61,296 $ 72,515 Transition Costs $ 43,197 $ 37,363 $ 80,560 The overall costs summarized by Reporting Entity Type are: Uniform Chart of Accounts Implementation Summary of Overall Costs Exhibit I-6 Local Education State of Governments Entities Florida Total Recurring Annual Costs $ 50,812,530 $ 9,156,521 $ 72,515 $ 60,041,566 One Time Transition $ 36,134,206 $ 36,354,541 $ 80,560 $ 72,569,307 I. Executive Summary 7
The average one time and annual recurring costs by Reporting Entity Type are: Average Cost by Reporting Entity Exhibit I-7 $500,000 $400,000 $300,000 $200,000 $100,000 $- One-Time Annual Recurring I. Executive Summary 8
II. Background and Purpose Florida Department of Financial Services The Florida Department of Financial Services (DFS) engaged KPMG, LLP (KPMG) to determine the statewide cost impact of a Uniform Chart of Accounts (UCOA) adoption and implementation, which requires the collection and validation of cost estimates from the Reporting Entities. A. HISTORY The 2011 State of Florida (State) Legislature passed Senate Bill 1292 requiring that a mechanism be provided for obtaining detailed, uniform reporting of government financial information to promote accountability and transparency in the use of public funds. To accomplish uniform reporting, Chapter 215.89, Florida Statutes requires the State s Chief Financial Officer (CFO) to propose Draft UCOA to establish uniform reporting requirements for all units of the government that include state agencies, local governments, educational entities and entities of higher education (collectively referred to as the Reporting Entities ) to meet the legislative requirements. By January 15, 2014, the CFO is required to present the UCOA to the Governor, the President of the Senate, and the Speaker of the House of Representatives. In addition to the UCOA, the CFO was tasked with identifying the estimated statewide cost impact for the UCOA adoption and implementation. B. OBJECTIVES KPMG administered an electronic web-based survey to collect, analyze, validate, and summarize UCOA cost estimates from Reporting Entities. Key project objectives include: A formalized draft Project Plan and Methodology; Survey development and distribution to Reporting Entities; A summary of the audit/validation results This report focuses on the cost estimate study and will help enable DFS to present a UCOA recommendation to the Governor, the President of the Senate, and the Speaker of the House of Representatives by January 15, 2014. II. Background and Purpose 9
III. Scope and Approach Florida Department of Financial Services To meet DFS s needs, KPMG s scope included three primary workstreams: Survey Development: Utilized Key Survey technology to develop an electronic survey for more than 2,000 Reporting Entities. Developed a Survey Template designed to gather the required financial information in a costefficient manner. Data Collection: Monitored the survey collection process and provided reports on response rates, reporting entity completion rates, pending incomplete surveys, and dates and times of completions. Survey Development Exhibit III-1 Data Analysis and Validation: Analyzed and validated cost estimate data as received from Reporting Entities during the survey process. KPMG analyzed survey data using the Statistical Package for Social Sciences (SPSS). KPMG organized the survey results based on Reporting Entity Category and then further organized by strata within each Reporting Entity Category to further group survey responses with similar characteristics (such as population or revenue). KPMG used statistical analysis to summarize and analyze the cost estimate data according to multiple strata. Within each stratum, KPMG calculated the normal distribution of survey results to identify outlier data or data outside of the first standard deviation from the mean. KPMG conducted further analysis to adjust or confirm outlier data with the applicable Reporting Entity. A. IDENTIFY REPORTING ENTITIES Data Analysis and Validation UCOA Data Collection For purposes of this project, there are 2,271 Reporting Entities responding to the survey (DFS represented 35 state agencies in a single survey response resulting in 2,305 Reporting Entities) which can be logically separated into three Reporting Entity Types and eight Reporting Categories: Local Government 2,158 local governments consisting of cities and municipalities, counties, special districts, and water management districts Education Organizations 112 education organizations consisting of colleges, universities, and school districts State Agencies 35 state agencies represented by DFS in 1 survey. Local Government entities follow uniform accounting procedures promulgated by DFS in the Uniform Accounting System Manual. Many of the Reporting Entities also have affiliated Component Units (CU s) or Direct Support Organizations (DSO s). These entities will be required to report CU or DSO financial information separately from the Reporting Entity at the CU or DSO entity level. During the planning process, DFS and KPMG identified a population of Reporting Entities CU s and DSO s that needed to be included in the survey process. DFS did not have a comprehensive list of these Component Units and Direct Support Organizations. KPMG believed that certain primary governments would not provide the underlying detail chart of accounts for these entities. To capture the cost of these entities, the survey instructions requested the Reporting Entity to identify any outside organizations with separate general ledger information that are part of the Reporting Entity s annual financial reporting. The Reporting Entity was then requested to either add any incremental costs or forward a separate survey to the CU or DSO. III. Scope and Approach 10
B. METHODOLOGY KPMG utilized the following five-phased approach to accomplish the project objectives: I. Project Kick-Off & Planning II. Survey Development III. Data Collection IV. Data Analysis & Validation V. Report Production & Presentation KPMG leveraged the use of technology and effective survey analysis to achieve desired outcomes with consideration of the State s allocated resources for this project. The three key phases (Survey Development, Data Collection, and Data Analysis & Validation) of the methodology are discussed in further detail in the sections below. B-1 Survey Development 1. Survey Technology Project Management and Communications The project administered an electronic survey to 2,271 Reporting Entities. To accomplish this task KPMG used a web-based survey tool. The survey tool was delivered via email to Reporting Entities, and was also accessible through a web-link on DFS Chart of Accounts Project website. KPMG utilized Key Survey technology to administer the survey to the Reporting Entities. Key Survey provides a robust, sophisticated platform with fully customizable solutions and unique functionality. KPMG developed a survey template with advanced logic that presented questions based on the responses given to the previous questions. KPMG used the following survey tool capabilities throughout this project: Configured survey questions as mandatory or optional Enabled Reporting Entities to start a survey, save, and return to complete at a later time Created standard survey data and questions with multiple choice questions, preloaded lists and free response for commentary Configured the design of the survey template to include the DFS logo Allowed survey questions to branch based on predefined paths (such as Crosswalk option versus Modify Financial System option) Provided access to real-time built-in survey completion statistics (e.g. how many have started or completed) Extracted survey responses in various file formats Distributed survey through email and DFS Chart of Accounts Project website III. Scope and Approach 11
2. Survey Development The Survey collected the following information: Reporting Entity Category Contact information Financial information Cost estimate information Assumptions or comments significant to the cost estimate information Statutory requirements that would be prohibitive in modifying the Reporting Entity s existing financial accounting system to the UCOA reporting structure 3. Survey Pilot Working with DFS on the survey technology and specifications, KPMG built the survey to achieve the agreed upon requirements. After the initial build, KPMG conducted a survey pilot to test the survey process with identified Reporting Entities. KPMG piloted the survey with eight Reporting Entities representing all of the entity categories surveyed: city and municipality, county, special district, water management district, college, university and school district. KPMG provided a one-week period for the eight pilot Reporting Entities to complete the survey. After the oneweek survey period, KPMG conducted a teleconference with the eight entities to obtain feedback on the survey tool regarding the overall survey experience, functionality, completion time, any issues encountered, and suggestions. KPMG received positive feedback with few recommendations to enhance clarity of certain questions. Based on the feedback from the pilot survey, KPMG adjusted certain survey questions to provide additional clarity, and streamlined certain questions to remove duplication. KPMG also removed a question from the pilot survey related to an entity s productivity rate based on pilot feedback and discussions with DFS. KPMG instead applied a standard productivity, or capacity rate in the cost estimate calculations. B-2 Data Collection After completing the survey pilot and pre-launch activities, including developing and finalizing the survey and drafting communication materials, KPMG commenced activities to launch the survey process. DFS distributed an email notification to the Reporting Entities communicating the survey timeline, contact information and link to the survey tool. A link to FAQ s was attached in the email that guided the Reporting Entities in completing the survey. As the Reporting Entities completed the survey, the data was housed on a secure server. The KPMG team consistently monitored the survey collection process and provided weekly reports to DFS on response rates, reporting entity completion rates, and pending incomplete surveys. KPMG used a six-week survey period for Responding Entities to complete the survey. While the link to the survey remained active, KPMG monitored the number of surveys started and completed. At the half-way mark of the survey period, KPMG identified the Responding Entities that had either not started the survey or had not completed the survey. Using the list provided by KPMG, DFS sent survey reminder emails to the identified Reporting Entities in an attempt to increase the survey response rate. III. Scope and Approach 12
KPMG received 474 primary government responses from the population of 2,271. A distribution of surveys received is as follows: Exhibit III-2 Uniform Chart of Accounts Implementation Survey Response Rate and Count by Reporting Entity Survey Total by Response Category Cities Response 177 Category 415 Rate 43% Counties 44 66 67% Special Districts 162 1,672 10% Water Mgmt 2 5 40% Colleges 24 28 86% Universities 12 12 100% School Districts 52 72 72% State Agency * 1 1 100% 474 2,271 21% * One survey response included the costs for the 35 State Agencies The following graph shows the response rate by Reporting Entity Category. The average response rate is 21%, due principally to a Special District response rate of 10%. Besides Special Districts, all other Categories had a response rate of at least 40%, with Counties, Colleges, Universities and School District response rates above 65%. 100% 80% 67% Response Rate 100% 86% 72% 100% Exhibit III-3 60% 40% 20% 43% 10% 40% 21% 0% III. Scope and Approach 13
B-3 Data Analysis and Validation KPMG s data analysis team began to analyze and validate cost estimate data as received from Reporting Entities during the survey process. The survey data was exported from the survey tool and analysis was conducted using the SPSS. Uniform Chart of Accounts Cost Estimate Calculation The cost for an entity to comply with the UCOA requirements was calculated directly from the entity s survey response. Each Reporting Entity provided: A data transmission method from one of three options: Data Transmission Method Description Exhibit III-4 Manual Crosswalk Technology Crosswalk System Modification Manually crosswalk financial information from the existing chart of accounts to UCOA reporting structure Use technology to automate the crosswalk process from the existing chart of accounts to the UCOA reporting structure Modify existing financial accounting system and chart of accounts to mirror the UCOA reporting structure The type of resources they intend to use to develop the transmission method from one of three options: Exhibit III-5 Resource Type Internal Resources Third Party Resources Internal/Third Party Resources (Both) Description Reporting Entity staff Third Party service provider Both Reporting Entity staff and Third Party service provider resources KPMG used survey time and expense data by Resource Type to calculate cost estimates per Reporting Entity. KPMG then attributed the cost estimates to the appropriate Data Transmission method as reported in each Reporting Entity s survey. In addition to each Reporting Entity identifying Data Transmission method, and Resource Type, the Reporting Entity provided information detailing the cost to comply with reporting for: One time operating and capital costs for transitions Monthly operating costs for reporting for revenues and expenditure information Annual operating costs for reporting for balance sheet information III. Scope and Approach 14
KPMG s cost calculations for the three resource classes is explained below: Internal Resources KPMG multiplied the hourly rate for each internal staff position by the number of hours for each work effort (one time, monthly and annual), adjusted for a fringe rate, if requested by the entity, and adjusted for a capacity factor of 89%. The capacity factor is a measure of productive employee time. The 89% capacity factor is based on an estimated 28 days (224 hours) out of the office each year for a combination of holidays and paid time off. After the conclusion of the pilot survey process, it was decided that this rate would be included in each calculation. Third Party Resources Reporting Entities could provide fixed fee or time and material information for using Third Party resources. For fixed fee estimates, KPMG added the reported costs for each work effort (one time, monthly and annual). For time and materials estimates, KPMG multiplied the hourly rate for each third party resource by the number of hours for each work effort (one time, monthly and annual). KPMG also added any reported one time costs or travel costs for each work effort to the calculated amounts. Both KPMG added the cost calculations for the Internal Resources and Third Party Resources when a Reporting Entity Indicated using Both resource types. KPMG conducted a preliminary analysis of the estimated cost for each of the Reporting Entity Types by Reporting Entity Category. The cost estimates were aggregated by Reporting Entity Category. KPMG received responses from all entities within two of the Reporting Entity Categories (Universities and State Government). KPMG received responses from 2 of the 5 Water Management Districts and 24 of the 28 Colleges. For these four Categories, it was not necessary to stratify the populations to extrapolate an aggregate cost. For the remaining four Categories (Cities and Municipalities, Counties, Special Districts, and School Districts), KPMG stratified the populations into either 3 or 4 strata to enable extrapolation by Reporting Entity Category. The following table shows each Reporting Entity Type, Reporting Entity Category and associated strata. Exhibit III-6 Reporting Entity Reporting Entity Category Applicable Strata Type Local Government Cities and Municipalities 4 layers organized by city/municipality size Counties 3 layers organized by county size Special Districts 3 layers organized by revenue size Water Management Districts N/A Education Colleges N/A Organizations Universities N/A School Districts 3 layers organized by county size State Government DFS N/A KPMG used a stratified sampling methodology to determine whether we received a representative sample by strata. KPMG received 601 completed survey responses, including a response from DFS. The survey data also included a response from a regional planning commission that was not included in the distribution of surveys. It was not a part of the identified reporting categories and has been excluded from analysis, resulting in a total of 600 surveys used to estimate the cost of the UCOA. III. Scope and Approach 15
As illustrated in Exhibit III-7, the survey database includes responses from 474 primary governments and 126 responses from related parties. The related parties include CU s, DSO s and County Constitutional Officers. The related party governments are added to the respective primary government to determine the total cost for the primary government sample. The total cost for the primary government, including the related party entities, is the basis for the cost extrapolation. Exhibit III-7 breaks out the survey responses by strata, or tier. The tiers for each Reporting Entity Category are further explained in Section IV Survey Results of this report. Exhibit III-7 UCOA Survey Responses Response by Strata Related Tier 1 Tier 2 Tier 3 Tier 4 Total Party Cities and Municipalities 1 6 53 117 177 5 Response Rate 100% 55% 66% 36% Counties 6 16 22 44 44 Response Rate 100% 94% 51% Special Districts 5 3 154 162 - Response Rate 19% 13% 10% Water Management Districts 2 2 - Response Rate 40% Colleges 24 24 8 Response Rate 86% Universities 12 12 26 Response Rate 100% School Districts 6 15 31 52 43 Response Rate 100% 83% 65% State 1 1 Response Rate 100% 474 126 Total Survey Responses used in the UCOA Cost Estimation 600 KPMG received a response from 474 primary government Reporting Entities, allowing the survey data to achieve the intended confidence interval. III. Scope and Approach 16
As identified earlier in the approach, KPMG used statistical analysis to summarize and analyze the cost estimate data according to four strata. Within each Reporting Entity Type and strata, KPMG calculated a normal distribution of survey results and conducted further analysis on data outside of the first standard deviation from the mean. KPMG normalized data collected and conducted the statistical analysis for each Reporting Entity Type and associated strata. For collected data falling into the second or third standard deviations, KPMG s data analysis team conducted additional analysis to validate the cost estimates reported. KPMG utilized the following data validation process for cost estimates where further analysis was required: Analyzed financial cost estimates provided by each Reporting Entity, as well as the underlying assumptions made by the entity in preparation of the estimates Compared personnel effort estimates (hours) of each Reporting Entity to the other entities within the strata (for Manual Crosswalk, Technology Crosswalk and Financial System Modification) Compared salary information by classification of each Reporting Entity to the other entities within the strata Compared fringe benefit rate multipliers of each Reporting Entity to the other entities within the strata Compared technology costs (one time acquisition cost and annual licensing fees) of each Reporting Entity to the other entities within the strata (for Technology Crosswalk option) Compared in-house personnel crosswalk costs of each Reporting Entity to the other entities within the strata Compared third-party crosswalk costs of each Reporting Entity to the other entities within the strata Compared overall total crosswalk costs of each Reporting Entity to the other entities within the strata Compared technology modification/upgrade costs of each Reporting Entity to the other entities within the strata (for Financial System Modification option) Compared in-house personnel cost estimates for COA redesign within the financial system of each applicable Reporting Entity to the other entities within the strata (for Financial System Modification option) Conducted an analysis of the results from the comparisons (above) and attempt to correlate cost estimate information to Reporting Entity type, size, and financial information reported Reviewed applicable cost related commentary From the data analysis activities identified above, KPMG identified the Reporting Entities that reported cost estimates that inconsistent with the other entities within their strata population. For these Reporting Entities, KPMG followed-up with each entity to better understand the cost estimates provided. If the Reporting Entities chose to revise their cost estimates during the follow-up process, KPMG re-ran the statistical analysis to determine their revised position on the normal distribution curve. KPMG analyzed the distribution curve to identify the average annual rate. In addition, KPMG identified any key areas observed for the Reporting Entities outside of the normal distribution curve. KPMG did not audit information provided by Reporting Entities and does not express an opinion on any financial information as defined in FS Chapter 473. This project is not intended to be an audit, examination, attestation, special report or agreed-upon procedures engagement as those services are defined in AICPA literature applicable to such engagements conducted by independent auditors. III. Scope and Approach 17
Additional Data Analytics KPMG s approach was based on an anticipated survey response rate of 15%. The planning and communication effort resulted in a favorable overall response rate of 21%, excluding component unit responses. KPMG used statistical analysis to summarize and analyze the cost estimate data. KPMG calculated a normal distribution of survey results and reviewed data outside of the first standard deviation of the mean. KPMG s planned approach was to validate up to 125 survey responses. To concentrate effort on the largest outliers, KPMG sampled all responses in excess of two standard deviations above the mean. KPMG selected a sample of 25 below the mean. No responses fell two standard deviations below the mean. KPMG performed additional procedures including contacting the entity to confirm or adjust the estimates within the response. KPMG validated over 159 responses. The responses validated included 81 samples of the high cost estimates and 78 samples of the low cost estimates. KPMG also validated responses from the special districts and the component units responses from the contacts listed for more than one entity. KPMG was successful in collection of 136 entities and noted changes to 81 entities based on discussions with Exhibit III-8 Data Validation No Validated Response Total City 23 4 27 College 3 4 7 County 10 5 15 School District 12 5 17 Special District 86 5 91 University 2 2 136 23 159 Exhibit III-9 Data Validation Impact on Survey Hours/ FTE Fringe Rate Other Costs None Total City 9 1 13 23 College 1 2 3 County 4 6 10 School District 1 11 12 Special District 2 59 3 22 86 University 1 1 2 15 60 6 55 136 the survey respondent. Exhibit III-9 illustrates the number of adjustments made by adjustment type: number of work hours or staff (Full-Time Equivalency (FTE s)), fringe rate, or other costs (i.e. duplicate costs reported). III. Scope and Approach 18
Reporting Data Analysis and Validation Results Based on the activities conducted above, KPMG reported a summary of our analysis to DFS. The summary included the following elements reported by strata (and Reporting Entity category within each strata): List of Reporting Entities that completed the survey List of Reporting Entities reporting cost estimates for Manual Crosswalk, Technology Crosswalk and Financial System Modification List of Reporting Entities reporting cost estimates within one standard deviation from the mean (and therefore no further analysis was required) List of Reporting Entities reporting cost estimates outside one standard deviation from the mean (in which KPMG conducted further analysis and validation activities) List of Reporting Entities KPMG conducted follow-up communication and results (whether or not the entity revised their cost estimate). For those entities remaining two or more standard deviations from the mean, KPMG reported discrepancies identified during the analysis, validation and follow-up process. Recap of methodology used to further analyze and validate the Reporting Entities where further analysis was required Summary of the cost estimates reported (in total, and for Manual Crosswalk, Technology Crosswalk, and Financial System Modification option) Summary of calculated cost estimates (in total, and for Manual Crosswalk, Technology Crosswalk, and Financial System Modification options) C. COMMUNICATION Effective communication from KPMG to DFS, the Government Support Organizations (GSO s) and the Reporting Entities was critical to the project s success before the survey launch, during the survey administration process and during the data analysis and validation activities. KPMG conducted the following communication activities during the survey period. C-1 UCOA Project Website KPMG assisted DFS in adding project-related communication to DFS Chart of Accounts Project website. Communication items included an overview of the UCOA Cost Estimate project, webcasts, anticipated frequently asked questions (FAQ s), as well as contact information for key DFS personnel. C-2 Notification KPMG s communications team assisted DFS in sending multiple email notifications to the Reporting Entities communicating the survey timeline, contact information and link to the survey tool. KPMG attached a link to FAQ s to the email distribution to assist the Reporting Entities in completing the survey. For entities that DFS did not have an email address, DFS sent a letter template notifying the Reporting Entities of the survey process. Other notifications sent to the Reporting Entities included an initial survey awareness email sent prior to the survey launch, a survey launch email, and multiple survey completion follow-up reminder emails. C-3 Government Support Organizations KPMG worked with DFS and the GSO s to draft content to be incorporated into newsletters sent by the GSO s to the Reporting Entities. Newsletter content included general information about the UCOA Cost Estimate project, project timeframes, DFS contact information, and a web-link to the DFS Chart of Accounts Project website. GSO s included: Florida Association of Counties Florida Association of Court Clerks III. Scope and Approach 19
Florida Government Finance Officers Association Florida League of Cities C-4 Webcasts KPMG worked with DFS to coordinate and conduct three webcasts for the Reporting Entities to receive additional information about the UCOA Cost Estimate project and provide a forum for questions and answers. Each webcast was designed with 30 minutes of prepared DFS and KPMG remarks, and allowed 30 minutes for questions and answers. The Webcasts were held on the following dates with the number of unique log ins indicating the attendance: September 16, 2013 216 unique log ins September 23, 2013 178 unique log ins October 3, 2013 144 unique log ins C-5 Help Desk Activities and Statistics DFS provided a Help Desk available to Reporting Entities during the survey period to answer questions about the survey or webinars. DFS received 79 phone calls and 251 emails. III. Scope and Approach 20
IV. Survey Results This section presents the results of the UCOA Survey and explains how the extrapolations were used to populate cost estimates for all government entities subject to the UCOA legislation. KPMG summarized the results into three types: Local Government Entities Cities and Municipalities, Counties, Special Districts, and Water Management Districts Education Entities Colleges, Universities and School Districts State Government This section summarizes the survey stratification, results, data validation and analysis and extrapolation for each category within the type of governmental entity. Within each of the three types, KPMG aggregated the ongoing and nonrecurring extrapolated costs. Finally, KPMG aggregated the cost for all three of the types in Section IV C1. of this report. A. LOCAL GOVERNMENT ENTITIES WATER MANAGEMENT DISTRICTS, CITIES AND MUNICIPALITIES, COUNTIES, AND SPECIAL DISTRICTS A-1 Cities and Municipalities DFS provided KPMG with a list of 415 Cities and Municipalities in the State of Florida. The population and revenues of these entities are of a broad range. Cities and Municipalities Tier Structure and Responses Cities and municipalities range from very small populations to very large populations and revenues. KPMG analyzed the cities and municipalities comparing ranges of revenues and populations to determine an appropriate grouping of cities and municipalities. The two largest cities in Florida using these characteristics are: 1) the consolidated governments of the City of Jacksonville and Duval County (2013 estimated population of 832,000) and 2) the City of Miami (2013 estimated population Exhibit IV-1 City Responses Extrapolation Total Sample Factor Tier 1 1 1 1.0000 Tier 2 11 6 1.8333 Tier 3 80 53 1.5094 Tier 4 323 117 2.7607 415 177 420,000). Pursuant to the responses and the population of the entities KPMG stratified the population into four tiers, as follows: Tier 1 Because the City of Jacksonville has characteristics of both a city and a county, we put the City of Jacksonville in a tier by itself. Tier 2 The next eleven largest cities and municipalities have a 2013 estimated population between 140,000 and 800,000 and with a similar scope of operations. Tier 3 Eighty cities and municipalities with 2013 estimated populations between 25,000 and 140,000 and with generally similar characteristics. Tier 4 The remaining 323 cities and municipalities with 2013 estimated populations less than 25,000. The survey responses included 177 from cities and municipalities in Florida. The survey responses also included 4 component units that were added to their primary government for aggregation. The total city and municipality IV. Survey Results 21
response rate for the survey was 43%. KPMG calculated extrapolation factors based on dividing the total tier population by the tier responses received. KPMG used the extrapolation factors to project survey response costs to the entire tier population. As explained in Section B.3 above, the following is a summary of the data transmission methods and resource types selected by the City and Municipality survey respondents. Data Transmission Manual Technology Modify 69 36 72 Resources Type Internal Third Party Both 102 10 65 Cities and Municipalities Data Validation and Analysis KPMG reviewed the survey responses received by calculating the estimated costs for compliance with the UCOA requirements. KPMG used data collected from the Cities and Municipalities surveys and calculated the estimated nonrecurring one time costs, recurring monthly costs for revenue and expense accounts, and annual costs for balance sheet accounts. KPMG calculated the mean and standard deviations for monthly recurring, annual recurring, one time transition and total costs. KPMG selected survey responses with costs outside the accepted deviation for further analysis. For entities outside of the normal distribution, we performed the following: KPMG analyzed the detail data points provided in the survey response to determine the data points that caused the response to be outside of the normal distribution. KPMG prepared a list of questions to discuss with the person who submitted the survey. KPMG contacted individual noted in the survey response by phone to confirm or adjust the survey responses. Exhibit IV-2 The Cities and Municipalities surveys required further review of 27 responses. The results of data validation and analysis included 17 entities that did not require a change and 10 entities that required adjustment to the submitted survey responses as directed by the entities. After the changes were updated, the costs were extrapolated to the tiered population and estimated costs were projected to the entire city and municipality population. City and Municipality Surveys Survey Response Costs One Time Monthly Annual Tier 1 $ 1,037,774 $ 28,864 $ 33,434 Tier 2 $ 1,601,513 $ 43,452 $ 68,313 Tier 3 $ 3,455,746 $ 242,667 $ 751,711 Tier 4 $ 1,664,988 $ 172,626 $ 467,287 $ 7,760,020 $ 487,609 $ 1,320,745 IV. Survey Results 22
Cities and Municipalities UCOA Cost Extrapolation KPMG estimated the total costs for the Cities and Municipalities by multiplying the survey response costs by the respective extrapolation factor. The extrapolation factor is determined by dividing the count of tier survey responses received (sample population) by the tier total population in order to estimate the costs associated with the UCOA implementation. Exhibit IV-3 City and Municipality Extrapolated Cost One Time Monthly Annual Total Average Total Average Total Average Tier 1 $ 1,037,774 $ 1,037,774 $ 28,864 $ 28,864 $ 33,434 $ 33,434 Tier 2 $ 2,936,106 $ 266,919 $ 79,662 $ 7,242 $ 125,240 $ 11,385 Tier 3 $ 5,216,220 $ 65,203 $ 366,289 $ 4,579 $ 1,134,658 $ 14,183 Tier 4 $ 4,596,504 $ 14,231 $ 476,566 $ 1,475 $ 1,290,032 $ 3,994 $ 13,786,605 $ 951,382 $ 2,583,363 IV. Survey Results 23
A-2 Counties There are 67 counties in the State of Florida. Duval County is part of a consolidated government with the City of Jacksonville. For purposes of this project, Duval County was included in the responses that are aggregated with Cities and Municipalities leaving 66 counties that comprise the County totals. County Tier Structure and Responses Counties range from very small populations to very large populations and revenues. The population and revenues of Florida Counties range from Miami-Dade County with a 2013 estimated population of 2,583,000 to Liberty County with a 2013 estimated population of 8,500. To extrapolate the results of the survey to an estimate for all Counties, KPMG grouped the Counties into three tiers. Pursuant to the responses and the population of the entities KPMG stratified the population into three tiers, as follows: Exhibit IV-4 County Responses Extrapolation Total Sample Factor Tier 1 6 6 1.0000 Tier 2 17 16 1.0625 Tier 3 43 22 1.9545 66 44 Tier 1 Six counties with 2013 estimated populations greater than 925,000. The five largest counties all have populations in excess of one million. (Miami-Dade, Broward, Palm Beach, Hillsborough, Orange, and Pinellas) The next largest county s estimated 2013 population is 643,000. Tier 2 The next seventeen largest counties have a 2013 estimated population in excess of 200,000 and have a similar scope of operations (Lee, Polk, Brevard, Volusia, Pasco, Seminole, Sarasota, Marion, Manatee, Collier, Lake, Escambia, Osceola, St. Lucie, Leon, Alachua, and St. Johns). Tier 3 The remaining 43 counties have 2013 estimated populations less than 200,000 and have generally similar characteristics. The responses to the county survey were tiered based on population which correlates to the revenues of the entity. The survey population of the county primary government is 66. KPMG received surveys from 44 county governments or 67% of Counties. KPMG calculated extrapolation factors based on dividing the total tier population by the tier responses received. KPMG used the extrapolation factors to project survey response costs to the entire tier population. In addition to the 44 surveys from County Governments, KPMG received surveys from 44 component units. Of the 44 component unit surveys received, 28 were from County Tax Collectors. County Tax Collectors are typically one of five (in addition to Property Appraiser, Clerk of Courts, Supervisor of Elections, and Sheriff) constitutional officers in County Government. No other type of constitutional officer accounted for more than 4 surveys. The Tax Collectors separately reached out to DFS and shared their perspective on the UCOA process. Due to the high number of Tax Collector survey responses received, KPMG separated them from the other component units and extrapolated the cost estimates for the Exhibit IV-5 County Tax Collector Surveys Survey Response Costs One Time Monthly Annual Tier 1 $ 26,243 $ 3,651 $ 4,429 Tier 2 $ 171,920 $ 22,733 $ 41,734 Tier 3 $ 289,970 $ 42,395 $ 196,444 $ 488,133 $ 68,779 $ 242,607 Tax Collectors and added their cost to the County totals. Exhibit IV-5 shows the Tax Collector survey response costs. As mentioned above, the Tax Collector costs are included in the County totals. IV. Survey Results 24