Loading...
HomeMy WebLinkAboutResolutions - 1993.06.24 - 22895June 24, 1993 MISCELLANEOUS RESOLUTION #93106 BY: FINANCE COMMITTEE, JOHN P. MC CULLOCH, CHAIRPERSON IN RE: MANAGEMENT AND BUDGET - AUTHORIZATION TO ESTABLISH THE COST REDUCTION INCENTIVE MANAGEMENT PROGRAM (CRIMP) To the Oakland County Board of Commissioners Chairperson, Ladies and Gentlemen: WHEREAS, in recent years, Oakland County has been experiencing a declining fund balance in the General Fund due to the propensity to utilize this resource to finance current operations; and WHEREAS, the County Executive has developed a Cost Reduction Incentive Management Program (CRIMP), to encourage cost reductions and increase productivity and economic delivery of public services, with the following specific objectives: - Provide management incentives to encourage cost reduction actions, particularly as they relate to the General Fund. - A portion of the cost reductions would be set aside for the participating departments to be used at their discretion. Ultimately, the use of these funds should further increase productivity or provide enhanced services to the public. - Cost reductions not set aside would be used to offset the operating short-fall for the General Fund and rebuild fund balance. WHEREAS, successful operation of CRIMP requires the establish- ment of a special revenue fund which will be used to track and monitor approved cost reduction plans and reserve a portion of savings for approved departmental projects with no funds being transferred to or from this fund without Board of Commissioner approval. NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners approves the concept of the Cost Reduction Incentive Management Program (CRIMP), as outlined in Attachment A, and authorizes the establishment of the CRIMP Fund as a special revenue fund in the County's Chart of Accounts to be used to track savings from this program. BE IT FURTHER RESOLVED that the following paragraph be inserted into Section 22 of the Oakland County 1993 General Appropriations Act: A special revenue fund entitled the Cost Reduction Incentive Management Program (CRIMP) Fund shall be utilized to track and monitor approved departmental cost reduction projects. Resulting budget amendments with recommended transfer of funds to the CRIMP Fund must be authorized by the Board of Commissioners and, subsequent to verification of actual savings realized, a portion of the savings may be utilized to supplement departmental appropriations for approved projects of a nonrecurring nature. Budget amendments transferring funds from the CRIMP Fund to departments, likewise, require Board of Commissioner authorization with all residual savings designated to be used to supplement General Fund equity. Chairperson, on behalf of the Finance Committee, I move the adoption of the foregoing resolution. FINANCE COMMITTEE GUIDELINES FOR COST REDUCTION INCENTIVE MANAGEMENT PROGRAM (CRIMP) FUND OAKLAND COUNTY - June 16, 1993 INCENTIVES TO BE DEVELOPED I. There are two portions of the verified cost reductions: A. The portion of the reduction that would be attributed to the department; such amounts shall be transferred to the CRIMP (special revenue) Fund. B. The portion of the benefit that would inure to the benefit of the General Fund. Two types of cost reductions: A. Non-recurring - would involve a one-time savings. B. Recurring - would involve a permanent savings which benefit future periods. Non-recurring. Given that there will be no future benefits to this type of cost reduction, a lower departmental split is appropriate. The departmental split would be 30% with the remaining portion transferred to the General Fund. IV. Recurring. Given that there would be benefits derived well into the future, a higher departmental split is warranted. The departmental split would be 60% for the first year; 30% in the second year and 20% for the third year. MECHANICS OF TRANSACTIONS V. Verifiability of the cost reduction is critical to the success of the program. The verified cost reductions identified in the current year would not be available until the following year. The amount of transfer to the special revenue fund would be identified and transferred as part of the year-end budget resolution approved by the Board of Commissioners. An example of the manner in which the CRIMP program would function under a non -recurring and recurring cost reduction follow: A. Non-recurring. Non-recurring cost reduction of $100,000 implemented effective October 1, 1993. Verification would take place in connection with the annual closing effort. The budget would be amended to 1 If transfer $100,000 to the special revenue fund; the portion designated for use by the department in 1994 would be $30,000 (30% times $100,000 reduction) . Reappropriation in the ensuing year would take place, after verification of the savings and submission of a spending plan by the department which is approved by the Board, with the proportionate share transferred to the department and the residual to General Fund balance. B. Recurring. Recurring cost reduction of $120,000 implemented effective October 1, 1993. Similar to the example noted above. Assuming that $30,000 of the cost reduction occurred in the 1993 calendar year, then $18,000 would be transferred from the special revenue fund in connection with the 1993 closing process. Assuming that the remaining $90,000 has been verified in connection with the 1994 calendar year closing, then $54,000 would be transferred from the special revenue fund for the remaining portion of the first year of savings. In addition, $30,000 times the second year of savings percentage of 30%, or $9,000, would be transferred from the special revenue fund at the close of 1994. The process would continue until year three. Over the three year period of time, the department would be credited with $132,000 of funds from the special revenue fund and the County's General Fund would have reduced costs otherwise incurred by $228,000. VI. The personnel who would verify the cost reductions would be: A. Department of Management and Budget for all departments other than itself. B. Auditing would verify Department of Management and Budget cost reductions. VII. Savings must be expressed in terms of actual not budgeted savings. Two issues involving employees must be • addressed: A. Vacant positions - The elimination of vacant positions eligible under the CRIMP would apply to those positions vacant for less than 60 days. The CRIMP program would • not apply to positions held open for longer than 60 days. Otherwise, a potentially vacant position that would never be filled could be used to 'artificially' create a transfer to the special revenue fund. The savings would be calculated on the basis of the actual position given up (due to the potential for bumping throughout the department). 2 B. Reclassification / downoradino - Cost reductions arising from downgrading would be eligible for the program. The downward reclassification must be recommended by the Personnel Department and approved by the Board to avoid challenge by the employee in the newly created position. Redlining of positions may result in a minimal amount of cost reductions associated with the reclassification / downgrading cost reduction recommendations in any event. C. Underfilled positions - Underfilling positions would not be eligible for the program as more often than not, the employee may be upgraded at some later date. The ability to follow the benefits derived from underfilling of positions would be difficult and highly subjective. VIII. Because this program is designed to increase the equity in the General Fund (or general governmental funds dependent upon the General Fund for local match or subsidies), the errant portions of cost reductions and the enterprise funds would be excluded from "capture" by the special revenue fund used for the department. Only the savings on the local match portion would be considered for inclusion in the special revenue fund. IX. A potential concern exists in that the department who gives up a position, creates equity in the CRIMP (special revenue) Fund and then, requests a position back in the future budget, or over-runs the budget (potentially in the area of unreimbursed overtime). The disincentive for exceeding the budget would be determined on the basis of the department's total operating budget (not simply the control points of salaries and fringe benefits, overtime and all other operating costs). The disincentive would be the sacrifice of future CRIMP benefits related to the benefits derived in earlier years. X. At times, there must be an investment in property and equipment to obtain cost reductions. Given that the transfer to the CRIMP (special revenue) Fund is performed after the fact, then the actual cost reduction (net of the investment required to obtain the savings) would be the base for the incentive program. As such, the CRIMP transfer would be based on the cost reduction after funding the investment. USE OF THE CRIMP FUNDS BY DEPARTMENTS XI. Use of the CRIMP funds: A. Equipment (tables, chairs). B. Computer equipment, related software and training. C. Consulting projects directed at management improvement, program evaluation and effectiveness, and increasing operating efficiencies. D. Seminars / training - to be monitored by Personnel Department. E. Discretionary programs of the department at an annual percentage of 20% that would limit the ability of the department to bring on a new operating program, only to have it not funded once the reappropriated funds have been exhausted. The limitation is in response to the concerns identified in the Gosling Amendment. F. Other acquisitions within the public purpose of the County. - PROHIBITIONS OF CRIMP FUNDS XII. Constraints on the use of the CRIMP funds: A. Cannot be used for salary increases, bonuses, incentive payments, or similar forms of increased compensation. B. Must be within the confines of the County's public purpose. XIII. Reporting of the uses of the funds by the departments and divisions to the Board of Commissioners should. be performed in connection with the annual budget process. XIV. Increased revenues would be excluded from the program. 4 D. Allen, County Clerk Resolution #93106 June 24, 1993 Moved by McCulloch supported by Oaks the resolution be adopted. Discussion followed. AYES: Douglas, Garfield, Gosling, Huntoon, Jensen, Johnson, Kaczmar, Kingzett, McCulloch, McPherson, Miltner, Oaks, Obrecht, Palmer, Pernick, Powers, Price, Schmid, Taub, Wolf, Aaron, Crake, Dingeldey. (23) NAYS: None. (0) A sufficient majority having voted therefor, the resolution was adopted. STATE OF MICHIGAN) COUNTY OF OAKLAND) I, Lynn D. Allen, Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and accurate copy of a resolution adopted by the Oakland County Board of Commissioners on June 24, 1993 with the original record thereof now remaining in my office. In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at Pontiac, Michigan this 24th day of June, 1993