HomeMy WebLinkAbout2005 NS Purchasing - Robert S. Segal, CPA for School/County Efficiency Enhancements
DRAFT
LETTER OF AGREEMENT
Robert S. Segal, CPA, PA (SEGAL) and Orange County (CLIENT) hereby enter into this Letter
of Agreement whereby SEGAL shall serve as a consultant to CLIENT to examine and analyze
certain practices, policies and procedures related to the fiscal operations of the County, the
Chapel Hill Carrboro City Schools and Orange County Schools in order to determine if
opportunities exist to improve efficiencies in operations and to provide information in the form of
questions or observations for the County's consideration. The types of questions and
observations contemplated are those that might relate to a comparison of educational resources
available to the two school systems that were NOT the subject of the earlier "Educational
Excellence Study" conducted by the UNC School of Education on behalf of the County
Commissioners.
The Client agrees that no such analysis are currently being performed or evaluated by CLIENT,
however, that these analyses in some cases could provide for savings and/or generate
additional revenues. If such instances occur, these items will be identified by SEGAL and will
be applied to the previous agreements dated October 19, 2004, which relate directly to
expenditure savings and revenue generation in which SEGAL will be compensated based on
provisions in said agreement(s).
SEGAL will furnish CLIENT with a written report as to results of his analysis. The report may
include, but not be limited to, observations, considerations, recommendations and other items
related to the overall operations, practices, and procedures of the agencies involved.
CLIENT agrees to pay SEGAL $100 per hour not to exceed 100 hours or $10,000. This fee will
be paid following the review and approval by the CLIENT of the work performed by SEGAL.
SEGAL AGREES TO MAINTAIN IN STRICT CONFIDENCE, CONSISTENT WITH THE
PROVISIONS OF THE NORTH CAROLINA OPEN RECORDS LAW, ALL INFORMATION
RECEIVED FROM CLIENT CONCERNING ITS EXPENSES AND METHODS OF DOING
BUSINESS. FURTHERMORE, SEGAL ACTS AS A CONSULTANT ONLY AND DOES NOT
RECEIVE ANY COMMISSIONS OR REMUNERATION OF ANY KIND FROM ANY VENDORS
OR SERVICE PROVIDERS.
The persons signing below are authorized to do so on behalf of their respective organizations.
This Letter of Agreement shall be binding upon the parties hereto, their heirs, successors and
assigns. This Letter of Agreement is entered into effective as of day of
CLIENT:
By:
Title:
Robert S. Segal, CPA PA
By:
Robert S. Segal
Title: President
336-886-2100
FAX 336-886-2101
wwwsegalcpa.com
April 14, 2005
Mr. Moses Carey, Jr., Chairman
Orange County Board of County Commissioners
P.O. Box 8181 .
Hillsborough, NC 27278
Dear Mr. Carey:
Robert S. Segal, CPA PA is pleased to report its progress on the collaboration
project involving Chapel Hill-Carrboro City Schools, Orange County Schools and
Orange County. We have accumulated data from the three organizations and
have noted some interesting possibilities for collaboration. We have started
researching their feasibility. In the meantime, we have performed reviews of
various items and can report the following progress.
Chapel Hill-Carrboro City Schools (CHCCS)
Telecommunication expenses
VVe have reviewed the telecommunications expenses and have prepared a
preliminary recommendation on how CHCCS could save approximately $67,000
per year net of Universal Service Fund/e-rate discounts and related costs.
CHCCS is currently in the middle of a major infrastructure upgrade. CHCCS is
working with BellSouth and the University of North Carolina (UNC) to implement
a plan~to connect to UNC in July 2005 for internet access at a reduced annual
cost. CHCCS did not initiate switching telecommunications services as we
recommended because they were in the middle of this upgrade. Once the
upgrade is complete, CHCCS is willing to review the recommendations and
implement any suggested cost saving strategies.
CHCCS IT shared that its long-range plan is to implement Voice Over Internet
Protocol (VOIP). They currently have implemented the Cisco VOIP solution in
two schools and several office locations. VOIP has a large upfront capital cost
that may be offset by future reduced monthly phone costs. IT did not share with
us a vendor's projection of costs or projected savings for VOIP. Therefore, we
are unable to evaluate this computation of savings. Further, we speculate that
the IT/vendor projection of savings is not reduced by E-rate funding. IT has not
needed to invest in VOIP equipment during the past year and has not needed to
ROBERT S. SEGAL, CPA PA
EXPENSE REDUCTION & REVENUE ENHANCEMENT 1912 EASTCHESTER DRIVE
SUITE 206
HIGH POINT, NC 27265
consider alternative providers of telephony or VOIP equipment. Based on our
suggestion, IT will consider alternative vendor solutions for any future VOIP
implementation.
While we were reviewing the paid invoices, we found $2,295.00 of monthly
service that was incorrectly billed and we are working with CHCCS to obtain a
refund. CHCCS personnel worked with the vendor to obtain a credit of
$31,833.86 on the March 2005 invoice.
In addition, certain invoices included taxes from which CHCCS could be exempt.
After we informed CHCCS personnel of the error, CHCCS contacted a previous
consultant who said they had requested the telecommunications vendor to
remove the taxes from the invoices. A later review revealed that the taxes had
not been removed from the invoices. The previous consultant is reported to be
working with the telecommunication vendor to have the taxation stopped
North Carolina Sales and Use Tax
Additional refund requests were mailed April 8, 2005 to the NC Department of
Revenue for the following periods and amounts:
2001-2002 $ 72,279.88
2002-2003 $176,731.57
2003-2004 $ 40,750.12
Total $289.761.57
Cash Management
We reviewed various cash management alternatives and recommended a new
accounts approved by t he State of North Carolina that has a higher interest rate.
Additional
Old New Ave Daily Interest
Month Rate Rate Balance Income
Jan 2005 2.05% 2.590% $ -0- $ -0-
Feb 2005 2.29% 2.847% $2,964,286 $ 1,377.13
Mar 2005 2.38% 2.950% $5,006,473 $ 2,423.68
The Bank has removed the compensating balance requirement of $1,200,000
from the primary account and as a result CHCCS is now earning the federal
funds rate less 20 basis points on the amount:
Additional
Month Balance Rate ~ Interest Income
Jan 2005 $1,200,000 2.05% $2,089.32
Feb 2005 $1,200,000 2.30% $2,117.26
Mar 2005 $1,200,000 2.38% $2,425.64
Note: This is less than we projected for two reasons:
1. The interest rate at the Bank has risen faster than the rate for
the new account,
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2. CHCCS could possibly move additional money to the new
account.
Natural Gas
Two schools use enough natural gas to qualify to purchase natural gas from
suppliers other than the local distributor. The local distributor has confirmed that
CHCCS could save money by implementing this recommendation. Based on
natural gas usage during the period November 2003 to October 2004, the
projected annual saving would be $7,000.00. CHCCS has approved this
recommendation which took effect January 1, 2005.
State Gas Tax
We found- one small account with a fuel company for the purchase of gasoline
and diesel. The account was not charged federal gas tax, but the account was
charged state gas tax. CHCCS is not required to pay state gas tax. Refund
claims in the amount of $2,200.00 have been filed through September 2004.
Orange County Schools (OCS)
Universal Service Fund/e-rate
For the past seven years, OCS has been eligible to receive these funds from the
federal government to offset the costs of telecommunications, Internet access
and certain equipment. During the summer of 2004, the a-rate coordinator left
OCS and we have been asked to prepare and manage the a-rate application
process for the 2005-2006 school year. The application process runs from
November 2004 to February 2005. Our review of the previous a-rate application
notes that it was very well done and appears to include substantially all of the
funding possibilities. Funding applications for 2005-2006 were filed for
approximately the same amount of funding as in 2004-2005.
Cash Management
We reviewed various cash management alternatives and recommended a new
accounts approved by the State of North Carolina that has a higher interest rate.
Additional
Old New Ave Daily Interest
Month Rate Rate Balance Income
Jan 2005 1.75% 2.590% $ 572,101 $ 408.15
Feb 2005 2.00% 2.847% $1,478,336 $ 960.55
Mar 2005 2.38% 2.950% $1,479,296 $ 716.14
Note: This is less than we projected for following reasons:
1. The interest rate at the Bank has risen faster than the rate for
the new account,
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2. The Bank is still paying the federal funds rate less 50 basis
point (CHCCS is less 20 basis points), and
3. OCS has not moved as much money as they could have to
the new account.
North Carolina Sales and Use Tax
We have received the data file from OCS and it is in the process of being
reviewed.
Orange County government
North Carolina Sales and Use Tax
To date, the reallocation project has found $68,671.38 of additional sales and
use tax. The County has received approximately 62% of that amount with the
municipalities receiving the balance.
Amended returns with savings of $49,219 have been submitted to the NC
Department of Revenue, but have not been processed. Data has been received
from UNC Hospitals and is being reviewed.
Other Expenses
Some operating expenses have been reviewed, but no recommendations have
been finalized at this time.
Collaborative Efforts:
Vendor Analysis
We have combined the vendor payments from the three organizations and have
ranked the vendors by volume. We have noted the primary purpose of the
expenditure and have noted instances where the same type of product/service
appears to be purchased from multiple vendors.
On March 30, 2005, representatives from all three organizations met to discuss
certain expenses which we thought had potential for collaborative purchasing.
Since the vendor invoices lists involved several categories of expenditures and
included a substantial amount of data, it was decided that a more thorough staff
review may be required to insure proper classification of expenditures.
However, the school districts identified two areas where they could collaborate
on joint purchasing projects. CHCCS's and OCS copier contracts expire July 1,
2006 and December 4, 2007, respectively. Both school districts have been in
the NC School Board Association (NCSBA) Workers Compensation Pool. Both
have been notified that NCSBA will no longer offer workers compensation.
Copiers and workers compensation would be excellent point bid projects for the
school districts.
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To conclude, the project is progressing and tangible results are emerging
already. The organizations do some things differently and we are exploring if
one is better than the other and if the better one would work at the others.
On behalf of Robert S. Segal, CPA PA, thank you for this opportunity. If you
have any questions or comments, do not hesitate to contact me.
Sincere ,
Robert S. Segal, CP
President
Cc: Dr. Shirley Caraway, Superintendent
Orange County Schools
Dr. Neil Pedersen, Superintendent
Chapel Hill-Carrboro City Schools
Mr. John Link, Manager
Orange County
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