HomeMy WebLinkAboutTR-8-91 �r
TOWN OF NEWCASTLE
REPORT File # y
Res. #
- By-Law #
MEETING: GENERAL PURPOSE & ADMINISTRATION COMMITTEE
DATE: January 7, 1991
REPORT #: TR-8-91 FILE #:
SUB.ECT:
GOODS AND SERVICE TAX IMPLEMENTATION
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration
Committee recommend to Council the following:
1. That report TR-8-91 be received;
2. That the recommendation outlined in the attached letter marked
Schedule "A" from Deloitte and Touche, Chartered Accountants be endorsed
as outlined in the body of this report;
3. That Staff be authorized to advertise for the position of GST
Clerk (Code 12, Range $26,169.00 - $31,401.00) forthwith;
4. That the required funds be provided for through the 1991 Current
Budget.
BACKGROUND & COMMENTS
1. Subsequent to Council Resolution #C-674-90, the Town's auditors, Deloitte
and Touche, Chartered Accountants have consulted with staff on numerous
occasions regarding the implementation of the Goods and Services Tax.
2. The total Town of Newcastle operating expenditure of approximately
$10,000,000 (ten million) is subject to either an input tax credit or
rebates. The approximate combined value of this revenue to be applied for
will be $350,000.00. One person will be required to review each invoice
and each purchase order before revenue can be input and filed for.
3. If tax is not collected, or late filing of taxes is made the Town will be
assessed penalties effective January 1, 1991.
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TR-8-91 Page 2
3. Significant progress has been made with the assistance of Deloitte and
Touche, in regard to setting up and developing new accounts. In order that
interest on tax credits and rebates may be applied for on a timely basis
changes to our current method of processing invoices will be required.
Deloitte and Touche have estimated that the potential interest savings
alone associated strictly with the filing of the rebate approximately forty
five days sooner than under the existing system will save the Town up to
$10,000 annually. This potential savings will only be realized by having
in place the additional staff position as supported by the auditor's
review.
4. If the services of Deloitte and Touche are required in order to meet these
legislative requirements, the cost associated will be substantially greater
than hiring a new staff member.
5. In the event that existing staff are required to shift priorities, in order
to meet legislated requirements there will be additional costs incurred due
to not being able to place orders in time to take advantage of pricing and
seasonal savings on the Town's regular operations and Capital acquisitions.
6. The Auditors Deloitte & Touche have outlined in the attached letter, some
additional job functions associated with the Goods and Services Tax
legislation and its implementation. The volume of tender and purchase
order activity in the purchasing division of Treasury has increased by more
than 100% over the past few years and therefore the additional workload
associated directly with GST that directly impacts purchasing functions
could not be accommodated without the regular purchasing activities for the
Town suffering severely.
As the GST legislation will take effect on January 1, 1991, a forthwith
approval is requested in order to advertise and place an individual as soon
as possible.
Respectfully submitted, Recommended for presentation
to the Committee,
ie A. Marano, H.BSc., Lawrence A. gotself,
Treasurer. Chief A in'strative Officer.
MAM/LAB/ges
ATTACH:
NOV 27 '90 10:41 DELOITTF_ OSHAWA F'•��_
Delp . SCHEDULE "A"
%A
Touche _
Deioitte&Touohe
Chartered Accountants
Bank of Commerce Building Telephone: (416) 679-8202
2 S. Box Street South Teiecopier4(416)8579-3388
P.O. Box 800
Oshawa, Ontario
L1H 7N1
Private And Conf dential
Mrs. Marie Marano November 26, 1990
Treasurer
Corporation of the Town of Newcastle
Municipal offices
40 Temperance Street
Bowmanville, Ontario L1C 3A6
Dear Marie:
In conjunction with council's resolution dated october 15, 1990, we are
providing you with our comments relative to a recent review of the workload
increase which will result from the implementation of the new Goode and
services Tax (G.S.T. ) and the related proposed changes to your purchasing and
accounts payable processing system.
Associated with the G.S.T. legislation and its implementation, there are
numerous additional job functions which would not appear to reasonably be
accommodated by existing treasury staff who, we are advised by management, are
working at capacity. Given this situation, we are of the opinion that one
additional staff member (G.S.T. clerk/purchasing assistant) will be required in
the treasury department to adequately perform the additional clerical work
required.
The duties of this new G.S.T. clerk/purchasing assistant are anticipated to be
as follows:
1. Become knowledgeable in the area of G.S.T. legislation and monitor the
Town's compliance with the current legislation.
2. Review all incoming invoices for G.S.T. Component.
3. Approve and code all invoices based on pre-approved purchase requisitions
and purchase orders, and control the accurate recording of G.S.T. paid on
all purchases on a timely basis.
4. prepare monthly G.S.T. claim forms promptly and follow up on tardy
remittances with the Federal Government.
S. Initiate required monthly journal entries to properly record G.S•T.
recoverable in the general .ledger accounts.
/ 5
Mrs. Marie Marano November 26, 1940 2
6. Keep up-to-date on all future G.S.T. changes that affect the Town of
Newcastle and monitor the Town's compliance with any new requirements.
7. Review current purchasing practices to determine the cost effectiveness Of
the following:
(a) lease vs buy decisions;
(b) self-supply vs outside purchases; and
(c) supplier arrangements.
S. Assist in training other departments' staff in the area of G.S.T.
compliance.
There will be an extra salary cost involved in the addition of one new staff
member. However, this additional cost may be offset by the following:
1. Filing for G.S.T. refunds on a more tamely basis would improve cashflow and
thereby reduce interest expense. At the present time, invoices are often
not processed through accounts payable until approximately 45 days after
invoice date. The G.S.T. would not be applied for until the invoices are
recorded in accounts payable, Under the proposed streamlined accounts
payable system utilizing the services of the new G.S.T. clerk/purchasing
assistant, the G.S.T. refund application should be able to be filed
approximately 45 days sooner. We estimate the potential interest savings
associated with this earlier filing of G.S.T. application farms to be
. approximately $8,b00 $14,000 annually.
2. A more up--to-date accounts payable system would produce more accurate
monthly financial statements and reduce the number of complaints received
from suppliers by the purchasing department resulting from slow payment of
invoices.
3. A more up--to-date accounts payable system would allow the treasury
department to take advantage of any available purchase discounts.
The above comments relate to our review of the anticipated workload requirement
resulting from the implementation of the G.S.T. as well as to the changes you
are proposing to streamline your purchasing accounts payable system and do not
represent an overall detailed staffing requirements review of the treasury
department.
we would be pleased to discuss these comments further with you at your
convenience.
Yours very truly,
AELOITTE & TOUCHL
Laurence L. Martin
Partner
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