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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. - 1 - 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: - 2 - 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 - 3 - 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 - 4- 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 - 5 - 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 - 6 - 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. - 7 - 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. - 8 - 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