8.4 Agr Asset Valuation
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION
DATE
01/06/03
TIME
4:00 P.M.
AGENDA SECTION
NO:
ORIGINATING DEPARTMENT:
APPROVED FOR
AGENDA:
8
FINANCE AND ADMINISTRATION
ITEM
NO.
Page 1
4
BY: Rodney Franz
BY: ~.A. J.
--- ~
ITEM:
Consider adoption of Resolution Number 03-5896 authorizing the City Manager to execute an
agreement with MAXIMUS, Inc. to provide Capital Asset Valuation and Inventory services.
BACKGROUND:
In the early 1990's, the City of Salina prepared an in-house inventory of "fixed" assets for the
purposes of complying with Generally Accepted Financial Reporting standards. Periodic re-
inventories have been done since that time, however, the reliability and accuracy of the information
provided by the system have deteriorated over time. In addition, while the information on record
provides the minimum required for financial reporting purposes, it is inadequate for addressing
information needs for risk management, asset maintenance and care, and complete management
information.
Staff is in the process of developing and implementing a system to address those needs. For the
system to be useful, the information gathered and entered to the system must be accurate and
reliable. MAXIM US is proposing that they provide the inventory, valuation and marking services
necessary to insure the accuracy and reliability of asset information with respect to insurance,
financial reporting, maintenance, and accountability needs. Specific property to be included in this
proposal are buildings and structures, licensed vehicles, furniture, machinery, and equipment, and
land improvements with an original cost of greater than $1,000.
MAXIMUS has just completed a review and appraisal of our Buildings and will use that information
for this project as well. They have performed well in that phase of the project, and have done similar
work for other public entities.
Sufficient funds are available in the Finance Department budget to cover the estimated cost of
$17,850.
RECOMMENDATION:
Staff recommends the adoption of Resolution Number 03-5896 authorizing the City Manager to
execute an agreement not to exceed $17,850 with MAXIMUS Inc. to provide valuation consulting
services.
MAXIMUS~
HELPING GOVERNMENT SERVE THE PEOPLE"
December 16, 2002
Mr. Rod Franz
Director of Finance
City of Salina
300 West Ash Street
Salina, KS 67402
Dear Mr. Franz:
Thank you for considering our firm for the City of Salina's infrastructure and capital
asset valuation project. We are pleased to provide the enclosed proposal for the
appraisal of the City's property records in order to assist the City with insurance
requirements and in future compliance with GASB Statement 34.
MAXIMUS' Asset Management Services Group (formerly Valuation Resource
Management) has served more governmental clients in the last ten years than any
other appraisal firm - evidence that our unique focus on the public sector is what our
clients appreciate and require. Our staff has taken the lead nationally in assisting Phase
I and early implementing entities with the development of their beginning balances for
capital asset reporting. We possess a proven knowledge of the new reporting
requirements and how important capital asset totals are in complying with this new
Statement. We also possess an established history of providing accurate valuation
conclusions for thousands of similar governmental entities. We feel this unparalleled
experience qualifies our firm to be THE solution for any unit of government.
Our proposal is based on our discussions to this point, the information you have
provided relative to your infrastructure assets and MAXIM US' unparalleled experience in
assisting similar clients with their property valuation requirements. This proposal can
be executed as an agreement simply by signing the enclosed Authorization page.
Should you have any questions or comments regarding our proposed service, please
feel free to contact me directly. I can be reached at either 888-778-8250, ext. 20 or
adambeckum@maximus.com.
Respectfully submitted,
MAXIMUS
/-l/- ~
Adam Beckum
District Manager
.t
13601 PRESTON ROAD. SUITE 201E. DALLAS, TX 75240-4915.888.778.8250.972.702.6400. FAX 972.702.6420
PROPOSAL FOR INFRASTRUCTURE &. CAPITAL
ASSET VALUATION SERVICES
FOR:
-KANSAS-
pOP. 45 CDJ
December 16, 2002
PREPARED BY:
MAXIMUS, Inc.
13601 Preston Road
Suite 201E
Dallas,TX 75240
(888) 778-8250
Adam Beckum
District Manager
MAXIMUS
TABLE OF CONTENTS
Page
I. Purpose of the Engagement 1
II. Scope - Capital Asset Valuation 2
III. Methodology - Costing & Valuation 2
IV. Asset Inventory & Identification Procedures 3
V. Database & Reports 6
VI. Timing 7
VII. General Information 7
VIII. Summary 8
IX. Authorization 9
EXHIBITS
Exhibit A - Professional Qualifications
MAXIMUS
PROPOSAL FOR INFRASTRUCTURE & CAPITAL
ASSET INVENTORY, COSTING & VALUATION
FOR THE CITY OF SALINA
MAXIMUS hereby proposes to provide professional valuation consulting services for the
City of Salina (hereafter, the City). The purpose, scope, procedures, output, timing and
fees are set forth as follows:
I. PURPOSE OF THE ENGAGEMENT
We have a clear understanding of the issues facing the City related to
infrastructure and capital asset reporting and valuation. The purpose of this
turnkey service is to provide the City with a completely updated and comprehensive
infrastructure asset appraisal to meet the following primary objectives:
INSURANCE:
Provide the City with current certified insurable
values of all appraised assets for insurance placement
and documentation, proper rating, proof of loss
substantiation, and a system for perpetuation of the
conclusions.
FINANCIAL REPORTING:
Prepare a property accounting system that will
assist the City in fulfilling current fiscal reporting
requirements for compliance with Generally Accepted
Accounting Principles (GMP) and GASB Statement
34; eliminate any audit concerns related to capital
asset reporting; assist the City in obtaining GFOA's
certificate of Achievement for Excellence in Financial
Reporting; and provide the guidance necessary to
comply with the new capital asset reporting changes
as pronounced by GASB Statement 34.
ASSET MAINTENANCE
AND MANAGEMENT:
Meet internal requirements for accountability,
security custodianship as well as assist in enhanced
utilization and maintenance of capital assets. Prepare
the infrastructure assets in a logical format to
produce multiple uses of that and other capital asset
data.
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MAXIMUS
II.
SCOPE - CAPITAL ASSET VALUATION
PROPERTY TO BE INCLUDED
The asset inventory and appraisal will include the following capital assets owned by the
City with an original unit cost of $1,000 or more and having an estimated useful life of
more than one year will be inventoried and identified individually:
. Buildings and structures
. Licensed Vehicles
. Furniture, machinery & equipment
. Land improvements
PROPERTY TO BE EXCLUDED
Property to be excluded from our appraisal will consist of antiques, records and
drawings, consumable supplies and spare parts, inventory items and personal property
of employees.
EXPECTATIONS OF CITY STAFF
MAXIMUS prides itself on truly managing our capital asset projects for clients. It is our
view that clients retain our services with the expectation that, as a paid consultant,
MAXIMUS will perform the necessary tasks to successfully complete our project. We
do, of course, view the City as an active participant and will anticipate your assistance
with the following:
. Pre-Project Planning - consisting of the identification of key department
contacts and coordination of our project kickoff meeting.
Transfer of Existing Infrastructure and Other Asset Records - MAXIM US will utilize
existing records, as provided by the City, to perform the asset inventory. We request
that a copy of the most updated capital asset data be provided to us in advance of the
project fieldwork. Additionally, our staff will request copies of last year's audited
financials to assist in reviewing asset totals. While our firm is not proposing a line-by-
line reconciliation/ we will utilize existing records where available and possible to tie
back more material and recently acquired assets. Whenever possible our staff will
perform a tie back of original cost and acquisition dates for amore material and recently
acquired assets, based on information the City provides.
III. METHODOLOGY COSTING & VALUATION
Our investigation of the property will follow generally accepted appraisal techniques and
will include the use of specific techniques necessary to develop valid and acceptable
original cost, date of acquisition and insurable value for each asset. We will determine
original cost by using the following costing methods:
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MAXIM US
The Direct Costing method will be used where historical data is readily available from
City records. The actual purchase cost and acquisition date will be maintained for those
assets. While MAXIM US is not proposing a detailed line-by-line reconciliation, our staff
will work with records as provided by the City to tie back original cost and dates of
acquisition on the more material and recent acquisitions.
Standard Costing is used when inventoried property units/groups not reconciled to a
historical record receive an estimated cost, where possible, based upon a standard cost
(a known average installed cost for a like unit) at the estimated acquisition date.
The Normal Costing method will be used where no historical information is readily
available. These assets will be valued on a current basis and back-trended to an
estimated date of acquisition to estimate the original cost. During the costing and
valuation procedures, all items will be assigned a useful life. The useful life of an item
will determine its approximate replacement year.
During the course of the inventory and the subsequent valuation research, our
appraisers will examine all assets to determine: a) date of acquisition b) original
cost, and c) cost of reproduction new, defined as follows:
ORIGINAL COST is the amount originally paid to acquire the asset, including such
cost as set-up charges; transportation; taxes; engineering and architectural fees; and
title insurance. If an asset was donated or bought for a nominal sum, GAAP requires
that the asset be accounted for at market value as of the date of acquisition.
COST OF REPRODUCTION NEW (CRN) is the amount required to reproduce property
in like kind and materials, in accordance with current market prices for materials, labor
and manufactured equipment, contractor's overhead, profit and fees, but with no
provisions for overtime or bonuses for labor and premiums for materials.
IV.
ASSET INVENTORY &. IDENTIFICATION PROCEDURES
PROJECT PLANNING
Our project team will hold a comprehensive project-planning meeting with City
representatives in conjunction with the start of the fieldwork. It is advisable that
members of the administrative staff or other directly involved personnel attend this
meeting. We also invite the City's auditors to participate in the meeting.
Topics of discussion will include confirmation of project scope and time frames,
clarification of assets to be verified, the fieldwork schedule, accessibility to records and
contact people for each responsible department, and availability and use of original
purchase records. Assignment of database code numbers and associated descriptions
for locations and classification codes will also be discussed. This meeting will also lay
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MAXIMUS
the foundation for the methods and procedures to be used in perpetuating the records
upon completion of the inventory and delivery of the reports.
PROCEDURES
All assets included in our inventory and appraisal will be recorded and categorized by
major account. This segregation of items will assist in reporting asset valuation totals
for capital asset reporting formats. The major categories are as follows:
A. BUILDING/STRUCTURES
The buildings/structures subject to our survey will be carefully inspected and measured.
In-house professional appraisers will independently calculate the square footage of each
building appraised either through the review of "as-built" blueprints or physically
measuring each building. Segregated construction components and building features
will be identified and valued. Building plans and photographs will be prepared for each
structure to become part of our proof of loss documentation, in addition to assisting
with the valuation efforts.
A description of each building will be developed and recorded, showing construction
type, and materials used. Building improvements (i.e., additions, renovations) will be
individually recorded.
The building components listed below will be individually analyzed and valued, as
applicable.
BASIC CONSTRUCTION
Excavation
Foundation
Frame
Height/Number of Floors
Roof Covering
Exterior Walls
Floor
Basement
BUILDING SERVICES
Plumbing
Fire Protection
Heating, Ventilation &
Air Conditioning
Electrical & Lighting
Burglar System
Elevators
INTERIOR CONSTRUCTION
Floor Covering
Ceiling
Interior Partitions & Built-in Features
Stairways
Covered Walkways
ATTACHED EXTERIOR CONSTRUCTION
Stairways Emergency Lighting
Covered Walkways Handicap Ramps
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MAXIMUS
D.
In addition to the analysis of individual building components, construction classes will
also be recorded. ISO classes 1-6, as defined in the Commercial Fire Rating Schedule
(CFRS) are defined in terms of the Marshall and Swift construction classes as follows:
ISO Class ISO Description M&S Class
1 Frame/Combustible D
2 Joisted Masonry C
3 Noncombustible 5
4 Masonry Noncombustible C
5 Modified Fire Resistive A
6 Fire Resistive B
During the office valuation portion of the engagement, property exclusions
(those items not typically covered by an insurance policy) will be
segregated to properly report the site preparation and excavation,
footings and foundations, and a portion of plumbing costs (underground).
B.
IMPROVEMENTS OTHER THAN BUILDINGS
Improvements outside of a building and particular to a parcel of
land will be inventoried and valued by location. Included are
assets such as parking lots, fencing, outside lighting and
flagpoles.
C.
FURNITURE, MACHINERY AND EQUIPMENT
A detailed inspection and field inventory will be conducted at all
buildings. During the inventory, equipment items will be placed into one
of the following categories:
Capital Assets - Equipment and furniture items with an original
unit cost of $1,000 or more, and having an estimated useful life of
more than one year will be inventoried and identified individually
and capitalized in the resulting reports and data.
Minor Equipment - Items that have an original unit cost of less
than $1,000 will be grouped by location and department/room for
insurance purposes.
VEHICLES
Licensed vehicles will be verified and updated in our appraisal based upon
information provided by the City. Listings provided should include vehicle
vehicles assignment, description, V.LN., acquisition date and cost, make,
manufacturer and model, where available. MAXIMUS will assume all
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MAXIM US
licensed vehicles are scheduled separately for insurance purposes, and will
include these assets only in the accounting sections of our reports.
CLASSIFICATION OF ASSETS
During the inventory and coding processes, MAXIMUS will classify each asset by distinct
type or category. Assets will be assigned to various classifications, each with its own
estimated normal life. This classification structure will enable the City to select off data
for flexible reporting, as well as provide a benchmark for projecting replacement of
capital equipment. Additionally this structure will provide the asset life schedule for
calculation of depreciation for current reporting requirements (enterprise fund) and
eventual compliance with GASB Statement 34 requirements (depreciation of all capital
assets). The City's involvement in the establishment of these guidelines will be
essential on the front end of our engagement.
v.
DATABASE & REPORTS
Database Structure
The information to be contained in the computerized data base inventory will include at
a minimum the following elements for each asset or group of assets:
A. Location & Building B. DepartmentjProgram*
C. Fund * D. Account (Asset Type)
E. Asset Classification Code F. Asset Number
G. Quantity H. Description
I. Date of Acquisition (Actual or Estimated)]. Useful Life
K. Original Cost (Actual or Estimated) L. Cost of Reproduction New
M. Accumulated Depreciation N. Current Year Depreciation
* Fund, Program & Department numbers are included with assistance of City
personnel.
Final Reports & Deliverables
The final reports will be presented in an easy-to-read format. Two copies of each
report will be provided (additional copies can be provided, upon request, for a nominal
charge). Detail as well as summary reports are included in the final product. A
narrative section that will certify our appraisal and document our procedures will
precede your reports. Your reports will include:
. Accounting Summary Report Sorted by Program, Department
. Accounting Detail Reports Sorted By Fund, Fund Type
. Accounting Summary Report Sorted by Category (asset type)
. Insurance Summary Report
. Insurance Detail Report
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MAXIM US
VI. TIMING
MAXIM US' automated approaches and depth of experienced staff qualify us to complete
all phases of this project within the desired time frame. Upon receipt of your
authorization MAXIM US will arrange a mutually agreeable schedule the project planning
meeting and our field investigation. Delivery of the final reports will be completed by
within 60-90 days of project commencement, assuming we receive any required
information from the County in a timely manner. It is our understanding that time
is of the essence given the City's need to implement GASB 34 reporting
requirements. We will work with the City to establish a mutually agreeable
timetable once we have been given the notice to proceed.
VII. GENERAL INFORMATION
The following conditions are considered standard practice in the performance of our
appraisal services and, if applicable, are made a part of this proposal and contract.
All available data and records deemed necessary in the search for costs and historical
background should be provided to our appraisal staff. The City should identify all
equipment not owned by the City in advance of the field inventory. A list of all assets
on loan or off site for repair should be furnished to the appraisal staff.
MAXIM US shall provide guidance to the City in determining the data required for
purposes of executing the tasks of this agreement. The City agrees to provide all data
requested, including documentation and information to MAXIMUS in a timely manner.
MAXIMUS shall assume without incurring liability therefore that all such data,
documentation and information provided by the City is accurate and complete.
In the event that the City provides additional and/or corrected data, documentation and
information at a later date, MAXIM US' efforts with respect to such additional and/or
corrected data, documentation and information shall be deemed additional services and
compensated in addition to the fees set forth herein based on then applicable hourly
professional fees and expenses.
We will maintain copies of the final reports, together with all field notes and working
papers in our files for a period of five years from the date of the appraisal. Should the
need arise, these documents will be made available to City. MAXIMUS will render
advisory service at no charge to the City or its auditors regarding the procedures and
methods used in the appraisal process and the resulting values of the assets appraised.
The attached fee schedule includes any and all expenses incurred by MAXIM US in
preparation and completion of the inventory, appraisal and reports. Our fees are
guaranteed for a period of ninety (90) days from the date of this offer, until executed.
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MAXIM US
MAXIM US will invoice the City for professional services rendered during the progress of
our work. Progress invoices, up to 90 % of the total fee, will be issued as our work is
completed and the balance, 10%, will be invoiced with delivery of the final report. All
invoices are due within 30 days of receipt.
We have relied upon certain property data provided by the City in developing our fee
estimate. Additional scope or corrections to the listing of properties provided to
MAXIM US necessitating a significant increase in professional time, will be charged at
our standard per diem rates, plus expenses, and billed in addition to the agreed upon
fee. Fee quotations for inclusion of additional properties or change in scope will be
provided upon request.
VIII. SUMMARY
The MAXIMUS proposal for infrastructure valuation service is designed to
accomplish the following:
. Establish an accurate, reliable property record with independent
third-party values;
. Establish realistic & customized asset lives and classifications
for depreciation calculations;
. Provide certified reports which will satisfy both insurance and
financial reporting requirements for GASB 34;
. Perform all necessary tasks in a timely manner so as to
implement a comprehensive capital asset management system
with the highest level of confidence in its validity.
We look forward to working with you and the City of Salina on this important project
and assure you our service will be as desired and expected. Should you have any
questions regarding this agreement, please contact me at 888-778-8250 ext. 20 or at
adambeckum@maximus.
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MAXIMUS
AUTHORIZATION
Please note the services you desire by placing a check mark in the space provided. The
City's TOTAL fixed fee investment, including out-of-pocket expenses, is as follows:
Capital Asset Inventory &: Valuation - Including
Buildings (insurance & accounting), Improvements and Equipment.
$1,000 Threshold
Bar Code Tags
$ 17,850
$125 per 1,000
Perpetuation Options
ASSETMAXX Software (per user)
$75 per month
Hand Held Dolphin Unit
Onsite Training
$
$
$
2,500
1,900
300
Data Disk (ASCII, Excel, or Access)
MAXIMUS will invoice you for professional services rendered during the progress of our work. Progress invoices,
up to 90 % of the total fee, will be issued as our work is performed and the balance, 10% will be invoiced with
delivery of the final report. All invoices are due within 30 days of receipt.
ACCEPTED: CITY OF SALINA
Name:
Title:
Date:
OFFERED BY: MAXIMUS, Inc.
Phone: {888)778-8250
#~
Adam Beckum, District Manager
December 16, 2002
MAXIMUS