Audit of Budget Development, Monitoring and Change Process.

Ngu11989

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• management
• managers

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• Publié par: Thaub
• Nombre de lectures: 27
• Langue: English

Extrait

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A UDIT OF B UDGET D EVELOPMENT ,

M ONITORING AND C HANGE P ROCESSES 

Exit Conference Date: May 8, 2003

Release Date: June 17, 2003  Report No. 03-13

C ITY OF O RLANDO 

O FFICE OF A UDIT AND E VALUATION 

 Beryl H Davis, CPA, CGFM Audit and Evaluation Director   Mona S. Mellon, CPA Audit Program Manager  Andrea Wilson Senior Auditor  Scarlet Gibson Auditor II

T ABLE OF C ONTENTS 

Memoranda .........................................................................................................................................................1  Executive Summary ........................................................................................................................................... 3  Background ....................................................................................................................................................... 17  Summary of Recommendations and Responses..............................................................................................19  Issues and Recommendations ......................................................................................................................... 24  Objectives ..................................................................................................................................................... 24  Scope and Methodology............................................................................................................................... 24  Structure and Policies .................................................................................................................................. 25  Ensure Dedicated Resources and Cutting Edge Focus for M&B............................................................................ 25  Enhance M&B Staffs Professional Development and Peer Interaction ................................................................ 27  Create Policy for City Reserves and Periodically Report on Reserve Usage .......................................................... 29  Require Proper Budget Accounts and Establish Approval Limits for Transfers ....................................................31  Update Written Internal Policies and Procedures and Enhance City Policies & Procedures ............................... 33  Seek Distinguished Budget Presentation Award .................................................................................................... 35  Further Enhance Communications with City Council and the Public ................................................................... 36  Monitoring and Reporting the Budget Compared to Actual Results ......................................................... 37  Develop Systematic Means for Budget Analysts to Monitor Budget Variances .................................................... 37  Develop Monthly Budgets and Compare Them with Current and Prior Year Actuals .......................................... 38  Prepare Monthly Budget Variance Reports and Require Departments to Explain Variances.............................. 40  Require Departments to Report Project Status and Communicate Results ......................................................... 41  Assign Responsibility for Charges and Pursue Automated Solution to Prevent Unauthorized Charges.............. 43  Enforce Policies & Procedures for Project Budgets to Prevent Overspending ...................................................... 45  Enforce Policies & Procedures to Monitor Project Spending for Major Fund Initiatives ..................................... 47  Developing Budgets and Establishing Priorities ........................................................................................ 49  Establish Project Assessment Team to Evaluate Project Feasibility...................................................................... 49  Establish Procedures for Budget Analysts and Operating Departments in New Budget Development Process .. 50  Ensure All Non-Routine Obligations are Included in the Annual Budget..............................................................51  Implement Function to Develop Budget Forecasts................................................................................................ 53  Consider Implementing a Biennial Budgeting System .......................................................................................... 54  Consider Implementing a Modified Zero-Based Budgeting System...................................................................... 55  Establish Procedures to Improve Payroll-Related Budget Calculations................................................................ 56  Require Estimates for Internal Facilities Projects ................................................................................................. 59  Establish Internal Contracts between Facilities and City Departments ................................................................60 

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1  Establish Policy to Return Incomplete Budget Revision Request Forms .............................................................. 61  Automate Sequential Numbering of Budget Review Request Forms and Limit Their Use .................................. 62  Identify and Solicit Quarterly Data For Items Subject to Fluctuation................................................................... 64  Require Calculations and Timely Submittal of All Effects of New Labor Contracts ............................................. 65  Appendix 1.................................................................................................................................................... 67 

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  M EMORANDUM 

To: Robert R. Garner, Management and Budget Director  From: Beryl H. Davis, CPA, CGFM, Audit and Evaluation Director  Date: June 17, 2003  Subject: of Budget Development, Monitoring and Change Processes Audit  (Report No. 03-13)  The Office of Audit and Evaluation has performed an audit of the Citys Management and Budget (M&B) section. The purpose of the audit was to determine the adequacy of M&Bs City Policies & Procedures, that staffs credentials are comparative to the tasks being performed, and that the actual budget development, changes, and oversight/monitoring practices are in compliance with written procedures and meet the reporting and accountability needs of the various City departments and senior management. Our audit report addresses these issues. The audit period was the first 5 months of the fiscal year ending 2003, with reference to prior years when necessary. Our examination was conducted in accordance with generally accepted government auditing standards and included a review of City Policies & Procedures, inquiries of City officials and staff, testing of budget revisions, and such other auditing procedures as we considered necessary in the circumstances. We relied upon computer generated information from sources such as the Citys JDE OneWorld general ledger system, the Budget Review Committee forms in Lotus Notes, and various spreadsheets prepared by M&B staff and fiscal managers in various City departments. We did not test the overall reliability of this information, because we were able to gather sufficient evidence from the individual items reviewed to support the recommendations in this report. We commend M&B for its conscientious efforts to increase the sharing of budget information with City executives and the public. M&B recently implemented new procedures designed to enhance the budget monitoring system. A monthly Budget Update is now posted on the Citys Website that compares the latest annual budget to fiscal year-to-date expenditures and includes the percent of budget utilized to date. In addition, City departments will now present their budget requests for the fiscal year ending 2004, not only to M&B and senior management, but also in a public workshop with City Council.

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M&B has additionally revised its annual budget process by requesting revenue information from departments a month earlier, so that it can determine an accurate level of expected revenues before considering planned expenditures. M&B staff continues to be responsive in assisting each department to develop appropriate budgets and control expenditures. We believe the recommendations in this report can serve to enhance existing procedures, improve quality controls, and elevate confidence in the Citys budget practices. The responses to our audit recommendations were prepared by the previous Budget Director. We recognize that you, as the new Management and Budget Director, plan to review the budget function. We have included on the following page your memorandum describing your plans. We would like to express our appreciation to the employees of M&B for their courtesy and cooperation during this audit.  BHD/am  c: Honorable Buddy Dyer, Mayor  David Dix, Chief of Staff  Richard L. Levey, AICP, Chief Administrative Officer  Kevin J. Edmonds, Deputy Chief Administrative Officer  G. Michael Miller, Chief Financial Officer  David L. Metzker, Public Works Director  

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  M E M O R A N D U M  To: Davis, Director, Internal Audit Beryl  From: Robert R. Garner, CPA, CMA, CGFO Director, Office of Management and Budget  Date:June 6, 2003  Subject:  Audit of Budget Development, Monitoring, and Change Process  I have reviewed the draft Budget Report prepared by the City of Orlando Internal Audit Office(Audit of Budget Development, Monitoring and Change Process).  As you are aware, I was assigned responsibility for the Management and Budget Department last week. In response to this reorganization, I plan to comprehensively review the Budget bureaus daily operating procedures, workflows, internal controls, and budget reporting methodologies, both as an unit and in relation to the new City structure.  I also plan to survey other key governments to determine their budget reporting and control practices. As a part of this effort, the GFOA Best Practices and the National Advisory Council on State and Local Budgeting documents will be reviewed.  Until I have the opportunity to perform the work outlined above, I have no basis to provide meaningful responses to the comments in the draft audit report. In addition, to provide an effective response, I need to determine the state of the bureau, the capabilities of existing staff, and budgeting system functionality. This will include analyzing operating effectiveness and efficiency.  Once this work is completed, I will again review the draft audit report and incorporate suggestions where appropriate. Based upon the system that I envision implementing, not all suggestions in the draft will effectively work in synergy. Alternatively, ideas from other governments and from our industry in general may prove more effective in certain circumstances given our goal of budget accountability and control.  Thank you for the opportunity to comment.  c: David Dix, Chief of Staff

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 E XECUTIVE S UMMARY 

objectives of our Audit of Budget Development, Monitorin Objectives, Scope  The and Methodology ementand Chan Processes were to determine whether Mana e Page 24 and Budgets (M&B) budget development, monitoring and change practices are in compliance with written policies and procedures and whether existing policies and procedures are adequate and meet the reporting and accountability needs of the various City departments and senior management. The audit period was the first 5 months of FY 2002-03, with reference to prior years when necessary. We reviewed relevant City policies and procedures, interviewed M&B staff, tested material budget revision requests, reviewed budgeting and spending activities in selected projects, and interviewed fiscal managers in four City departments.

 The Citys M&B function is so important to the Citys fin Ensure Dedicated ancial Resources andwell-being that we recommend an appointed official who can Cutting Edge Focus for M&B dedicate full time to this function exclusively. The current situation of having one individual responsible for the M&B Page 25  function along with directing 7 other bureaus and offices is not viable, in our opinion. To increase the service level, the Budget Director should quantify any additional resources needed, and formulate an action plan to elevate the level of budget analysis and reporting needed to effectively control budget processes and communicate results.

Enhance M&B  Budget Director and 2 of 5 primary budget staff members The Staffs Professionalhave accounting or finance degrees, and all budget staff meet Development and the position criteria as published. We recommend that the Peer Interaction Budget Director emphasize the need for staff degrees in

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Page 27  accounting and finance in the future. Professional staff generally receive approximately 2 days of professional training a ear. We recommend more trainin , more active artici ation and greater interaction with budget peers, and additional experience in best practices through professional organizations.

Create Policy for   There currently is no formal policy regarding the establishment City Reserves andor use of City financial reserves. Having a stated policy would Periodically Report make clear the direction of elected officials concerning these on Reserve Usage vital resources. Reserves should be distinguished by type (e.g.: Page 29  operating, capital, debt); by purpose (e.g.: pay debt service when cash is not available); b ob ective (e. .: one ears annual debt service); and b tar et level ($$$). Whether desi nated for debt service, capital outlays, supplementing revenues to produce a balanced budget, coping with catastrophes or other purposes, usage of reserves in the future should be sanctioned in coordination with the projection of needed amounts of reserves. We recommend that the Budget Director work with the Chief Financial Officer (CFO) to propose formal policies about establishing needed reserves and the conditions necessary for the use of City reserves. We also recommend that the Budget Director, with the CFO, propose policies to report periodically on the actual uses and amounts of reserves and how current fiscal conditions may affect reserves.

Require Proper  current City policy gives the Budget Director final The Budget Accountsapproval of a broad range of Budget Revision Requests Appro a v n al d   L E i s m t i a t b s l  i f s o h r   (BRRs), and states that the Budget Director should approve all Transfers budget transfer requests for projects if the funding is available Page 31  in the correct accounts and all transfer requests are within approved projects. Budgets for projects and other items are

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generally set up in contingency accounts, and transfers to the correct sub-accounts are requested later. The Budget Director indicated that she does not approve such requests but rather reviews the requests from other City officials related to funding previously approved by City Council. We tested the BRRs related to transfers and noted that the following transfers identifying the Budget Director as the approver: the transfer of $1 million for a real estate acquisition, and $794,000 from a capital outlay group to a professional services account to cover professional services charges for a regional signal system project.

The Budget Director should exercise authority to approve or disapprove transfer requests for City Council approved ro ects, with limitations. City Policies & Procedures should be revised to: (1) require departments to place reasonably accurate amounts into appropriate budgetary accounts or sub-accounts rather than into contingency accounts; and (2) establish dollar limits for the Budget Director, other officials, and the BRC to approve transfers between accounts.

 Update Written M&Bs written internal policies and procedures have not been Internal Policies updated for several years. Examples of needed internal policies and Procedures and procedures include: how M&B staff should formally and Enhance City Policies communicate budget variances; and how M&B staff should Procedures calculate, verify or review salary and other important Page 33  calculations used in the budget. City Policies & Procedures should state the degree of responsibility department directors should have for managing their budgets, and the degree of control M&B should exercise. Cit Policies & Procedures should be developed or enhanced to include, for example: when, how

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and by whom variance analysis should be performed and reported; a requirement to establish monthly budgets; and specifics about holding departments accountable for their project budgets and for submitting project status reports. We recommend that the Budget Director update the programs internal policies to clearly delineate M&B staff responsibilities and further enhance City Policies & Procedures to include all responsibilities of or interactions with other City departments or offices.

Seek Distinguished  Budget Director should seek the GFOAs Distinguished The BudgetBudget Presentation Award, which encourages governments to Presentation Award prepare budget documents of the highest quality to meet the needs of decision-makers and citizens. Page 35 

Further Enhance  M&B could enhance its communications with the public by Communicationsstriving to make the Citys budget data more user-friendly so wit a h n C d i  t t y h  e C P o u u b n l c i i c l   that parties such as City Council members and the public have access to data and explanations in formats they can use. We Page 36  recommend that the Budget Director consider publishing an explanatory booklet and examine the best practices of other local governments for examples to enhance reporting including easily understood high level summaries and pictorial presentations using graphs and charts.

Develop  As there are no formal requirements directing the Budget Systematic MeansAnalysts in monitoring and reporting on budget variations, A fo n r a  l B y u st d s g t e o t  each Analyst takes the initiative to provide his or her client Monitor Budget bureau with relevant information about budget variances Variances through verbal communication, email, or various reports from

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Page 37  JDE OneWorld. Special reporting for individual customers should still be encouraged, but a greater benefit will be achieved through a sytematized monitoring process. We recommend that the Budget Director develop a systematic means for the Budget Analysts to monitor budget variances for all operating units or programs and every project, identifying the types of monitoring reports to be generated, the timing of report distribution, and the requirement for formal communication of budget variances.

Develop Monthly   In February 2003 M&B began preparing monthly reports at a Budgets and the ainsthigh level that compare year-to-date actual amounts a Compare Them with Current and annual budget, and show the remaining balances. However, Prior Year Actuals this does not readily reveal to a reader whether actual Page 38  expenditures for part of a year are commensurate with the portion of the full years budget that should have been spent, because some operations are seasonal, cyclical or project- oriented. We recommend that the Bud et Director ro ose Cit Policies & Procedures requesting the operating departments to implement a phased-in program to develop budgets for each month of the fiscal year, including non-departmental revenues and expenditures; and utilize this information in comparing budget figures to current and prior year actual amounts. We recommend that M&B work with the CFO and Comptroller to develop the best means of reporting this information.  

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