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Doc 2 2008 Budget Development Process Audit of the OPL

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2 A C T I O N Subject: 2008 Budget Development Process Audit of the Ottawa Public Library (OPL) Prepared by: Jan Harder Chair, Ottawa Public Library Board Prepared for: Ottawa Public Library Board Meeting of: August 19, 2008 Date of preparation: August 13, 2008 RECOMMENDATION That responses be developed to the recommendations within the Audit of the Budget Development Process at the Ottawa Public Library (OPL) 2008 Report . References • Ottawa Public Library Board Minutes, February 11, 2008 • Letter from Auditor General, February 13, 2008 • d, Governance Committee Minutes, February 29, 2008 • Doc. 2 from the March 17, 2008 OPL Board Meeting: Governance Committee Report • Ottawa Public Library Board Minutes, March 17, 2008 Background th1. At its meeting of February 11 , the Library Board agreed to participate in a Governance Audit. At the Board’s request, the City of Ottawa Auditor General, Alain Lalonde agreed to expand the scope of the project to include an audit of not only governance practices, but also budget development processes. th2. On March 17 , the Library Board approved the Audit Questionnaire to be used in preparation for the audit. 3. The Auditor General’s Office conducted interviews with current and former Board members and key library and City staff in developing the audit. Appendix 1. Audit of the Budget Development Process of the Ottawa Public Library (OPL) 2008 Report Doc. 2 2008 Budget ...
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A C T I O N

Subject: 2008 Budget Development Process Audit of the Ottawa Public Library
(OPL)

Prepared by: Jan Harder
Chair, Ottawa Public Library Board

Prepared for: Ottawa Public Library Board

Meeting of: August 19, 2008

Date of preparation: August 13, 2008


RECOMMENDATION
That responses be developed to the recommendations within the Audit of the Budget
Development Process at the Ottawa Public Library (OPL) 2008 Report .

References

• Ottawa Public Library Board Minutes, February 11, 2008
• Letter from Auditor General, February 13, 2008
• d, Governance Committee Minutes, February 29, 2008
• Doc. 2 from the March 17, 2008 OPL Board Meeting: Governance Committee Report
• Ottawa Public Library Board Minutes, March 17, 2008

Background

th1. At its meeting of February 11 , the Library Board agreed to participate in a Governance Audit. At
the Board’s request, the City of Ottawa Auditor General, Alain Lalonde agreed to expand the
scope of the project to include an audit of not only governance practices, but also budget
development processes.
th2. On March 17 , the Library Board approved the Audit Questionnaire to be used in preparation for
the audit.
3. The Auditor General’s Office conducted interviews with current and former Board members and
key library and City staff in developing the audit.

Appendix

1. Audit of the Budget Development Process of the Ottawa Public Library (OPL) 2008 Report




Doc. 2 2008 Budget Development Process Audit August 19, 2008






Office of the Auditor General / Bureau du vérificateur général
AUDIT OF THE BUDGET DEVELOPMENT PROCESS AT THE
OTTAWA PUBLIC LIBRARY (OPL)

2008 Report


2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board


Table of Contents
EXECUTIVE SUMMARY........................................................................................................... i
1 INTRODUCTION............................................................................................................... 1
2 BACKGROUND ................................................................................................................. 1
3 AUDIT OBJECTIVES AND APPROACH ..................................................................... 4
4 OBSERVATIONS AND RECOMMENDATIONS ...................................................... 6
4.1 Goals, Objectives and Needs Assessment ............................................................. 7
4.2 Policy and Procedure Development........................................................................ 8
4.3 Budget Preparation and Review Processes ............................................................ 9
4.4 Budget Documentation............................................................................................ 12
4.5 Performance Monitoring ......................................................................................... 13
4.6 Budget and Related Adjustments.......................................................................... 14

5 CONCLUSION.................................................................................................................. 15
6 ACKNOWLEDGEMENT ................................................................................................ 15

2008 2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board


EXECUTIVE SUMMARY
Introduction
The Audit of the Budget Development Process at the Ottawa Public Library (OPL) was
requested by the OPL Board at its February 2008 Board meeting.
Background
The Ottawa Public Library (OPL) system consists of 33 branches: a Main branch, district
branches and different levels of community-based branches. The OPL is the largest
bilingual, French-English, library in North America. This is reflected in its collection,
programs and services. The Ottawa Public Library serves over 790,000 people in a
geographic area of 2,760 sq. km, 90% of which is rural.
The Ottawa Public Library (OPL) is governed by a Board, as required under the Public
Libraries Act (1990). The OPL Board is appointed by Council to provide oversight and
direction to the Ottawa Public Library. The Board is made up of 14 Members appointed
by Council, including 6 City Councillors and 8 members of the public. The role of the
Library Board is to provide oversight and ensure that the library remains accessible,
accountable and relevant to the needs of the citizens of Ottawa.
The Ottawa Public Library Board is also accountable to the provincial Minister of
Culture and a must submit an annual report to the Ministry.
The approved total net operating budget for the Ottawa Public Library in 2008 is $36
million, broken down as follows:
• Compensation and benefits – 74%
• Materials and services – 15%
• Program facility costs – 10%
Scope and Objectives
The objective of this audit was to assess the adequacy and effectiveness of the current
procedures used by the Ottawa Public Library (OPL) in preparing, reviewing, adopting
and monitoring its annual budget. The scope included the processes used in preparing
the 2008 budget. The audit did not question the specific funding decisions and
allocations as determined by the Ottawa Public Library.
Audit Criteria
Audit criteria for this audit were developed based upon the Government Finance
Officers Association’s Recommended Budget Practices – A Framework for Improved

2008 Page i 2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board

Local and State Government Budgeting. Current practices were assessed against a
number of specific criteria in the following categories:
1. Goals, Objectives and Needs Assessment
2. Policy and Procedure Development
3. Budget Preparation and Review Processes
4. Budget Documentation
5. Performance Monitoring
6. Budget and related Adjustments.
Summary of Key Findings
Overall, the current processes used at the Ottawa Public Library (OPL) to develop its
annual budget are effective. The audit found that a large majority of the audit criteria
are being met, particularly with regard to assessment of needs, establishing
organizational goals and objectives and budget preparation, internal review and
documentation.
Areas that need to be strengthened to improve the process include:
• A thorough review and update of the financial policies to ensure they are complete
and provide clear direction to the Chief Librarian;
• Developing forecasts for expenditures and revenues to establish a multi-year
budgeting process;
• Clarifying the reporting and accountability relationship between the OPL Board and
Council, and the Chief Librarian and the City; and,
• Developing and implementing a more relevant performance measurement
framework.
Recommendations
Recommendation 1
That OPL senior management strengthen its budget development process and
require each operational area to present potential cost saving opportunities, which
are then presented to the Board for discussion and debate.
OPL Response

Recommendation 2
That the OPL Board review and update the Board financial policies to ensure they are
complete and provide clear direction to the Chief Librarian and the Treasurer.

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OPL Response

Recommendation 3
That the OPL Board clarify its arms-relationship with the City by developing a clear
and concise policy that defines the relationship in terms of reporting and
accountability.
OPL Response

Recommendation 4
That the OPL Board reinforce the Chief Librarian’s sole reporting relationship to the
Board (see Recommendation 2 in the Governance Audit of the OPL Board).
OPL Response

Recommendation 5
That the OPL Board direct the Chief Librarian to include, as a part of the annual
budget development process, various budget scenarios which are presented to the
Board for discussion and debate.
OPL Response

Recommendation 6
That the OPL develop multi-year budgets to present to the Board which clearly
outline the anticipated impact on service levels and funding requirements.
OPL Response

Recommendation 7
That the OPL should expand its reporting to the Board to include regular reports on
the status of efficiency targets and capital projects.
OPL Response

Recommendation 8
That the OPL Board work with senior management and provide direction on a more
relevant performance measurement framework for the OPL (see Recommendation 22
in the Governance Audit of the OPL Board).
OPL Response


2008 Page iii 2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board

Recommendation 9
That the OPL Board consider creating a Performance Measurement Committee to
oversee the development, implementation and monitoring of a performance
measurement framework (see Recommendation 23 in the Governance Audit of the
OPL Board).
OPL Response

Conclusion
Overall, the current processes in place to develop the budget for the Ottawa Public
Library are adequate. However, the audit has made recommendations to strengthen
the budget development process which include a thorough review and update of the
financial policies to ensure they are complete and provide clear direction to the Chief
Librarian, developing multi-year budgets, clarifying the arms-length reporting
relationship that the OPL has with the City and reinforce a direct reporting relationship
to Council, and developing a more relevant performance measurement framework.
Finally, the OPL Board along with Library senior management need to be more
rigorous in presenting and considering budget reduction scenarios and efficiency
targets.
Acknowledgement
We wish to express our appreciation for the cooperation and assistance afforded the
audit team by the OPL Board and OPL senior staff.

2008 Page iv 2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board

1 INTRODUCTION
As requested by the Ottawa Public Library Board on February 11, 2008, the Auditor
General has completed an audit of the budget development processes used by the
Ottawa Public Library (OPL).
2 BACKGROUND
2.1 Ottawa Public Library (OPL)
The Ottawa Public Library system consists of 33 branches: a Main branch, district
branches and different levels of community-based branches. Library services are also
offered within city boundaries to communities without a local branch by mobile
services. The OPL is the largest bilingual, French-English, library in North America.
This is reflected in its collection, programs and services.
The library system also consists of a number of centralized services: Access, Outreach &
Volunteer; Adult and Readers’ Advisory; Children and Teen; Circulation; Collection
Development; Community Partnerships and Programming; Information Services;
Technical Services and Virtual Library Services.
The Ottawa Public Library serves over 790,000 people in a geographic area of 2,760 sq.
km, 90% of which is rural.
2.2 Oversight
Acts and Legislation
The Ottawa Public Library (OPL) is governed by a Board, as required under the Public
Libraries Act (1990). The Public Libraries Act defines how the OPL should operate, its
accountability requirements to City Council and to the Province of Ontario, as well as
its responsibilities regarding the delivery of library services. It defines the library board
as a governing board, giving it the authority to make policy and direct the affairs of the
OPL. The Act sets out the powers and duties for the OPL Board that relate to making
policy, setting fees, holding meetings, appointing officers, appointing and removing
employees, and managing board finances. It also indicates the level of discretion
available to the OPL Board to carry out these powers and duties.
Other legislation that have governing authority over the OPL Board include:
• The Municipal Act
• The Municipal Affairs Act
• Government Efficiency Act
• Municipal Freedom of Information and Protection of Privacy Act


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2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board

The Ottawa Public Library (OPL) Board
The OPL Board is made up of 14 Members appointed by Council, including 6 City
Councillors and 8 members of the public. The Act requires the Board be composed of at
least 5 members, and that Councillors not represent the majority. The role of the
Library Board is to provide oversight and ensure that the library remains accessible,
accountable and relevant to the needs of the citizens of Ottawa.
Provincial Oversight
The Ottawa Public Library Board is accountable to the provincial Minister of Culture
and a must submit an annual report to the Ministry.
City Council Oversight
The OPL Board is appointed by Council to provide oversight and direction to the
Ottawa Public Library. More specifically, section 24 of the Act outlines Council’s
financial control, as follows:
• The Board must submit budget estimates to Council in a format set by Council on or
before a specified date by Council.
• The Board must adopt the budget as approved by Council.
• Council must pay the amounts in the budget to the Board.
• Council has line by line control over the Library Board’s budget until approved.
• Once approved, spending authority rests with the Board.
• The Board must submit an audited financial statement each year and report
regularly on activities and operations.
The Ottawa Public Library receives 90% of its funding from the City of Ottawa. OPL
funding is as follows:
• $31 million from the City of Ottawa;
• $2.1 million from fees (e.g. late fines, facility rentals); and,
• $1.38 million in provincial grant funding.
2.3 Budget
The approved total net operating budget for the Ottawa Public Library in 2008 is $36
million, broken down as follows:
• Compensation and benefits – 74%
• Materials and services – 15%
• Program facility costs – 10%

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2008 Audit of the Budget Development Process at the Ottawa Public Library (OPL) Board

It should be noted that the program facility costs were recently added to the budget as
they where captured under Real Property and Asset Management’s (RPAM) budget
prior to 2007. Without these costs, compensation and benefits represent approximately
83% of total OPL expenditures for 452 FTEs. The 2006-2008 budgets are presented in
the table below
Table 1: Ottawa Public Library 2006-2008
2006 2007 2008
By Program Actual Budget Actual Budget Adopted % ($000) ($000) ($000) ($000) ($000)
City Librarian’s Office & 1,100 1,137 1,035 1,213 1,239 3.4
Library Centralized Services 16,433 14,694 16,296 15,895 16,428 45.3
Library Branch Services 16,432 15,524 17.341 17,5888,614 51.3
Total Expenditures 33,965 31,355 34,672 34,696 36,281 100
Client Recoveries - - - - -
Productivity Improvements - - - - (242)
33,965 31,355 34,672 34,696 36,039
Revenues
Federal / Provincial (1,539) (1,380) (1,517) (1,380) (1,380) 38.2
City Reserves (138) (138) (120) 3.3
General/Fees/Charges (2,297) (1,885) (2,444) (2,115) (2,115) 58.5
Total Revenues (3,836) (3,265) (4,099) (3,633) (3,615) 100
Net Requirement 30,129 28,090 30,573 31,063 32,424
By Expenditure Type
Comp. and Benefits 24,833 22,277 25,880 25,475 26,955 74.3
Material and Services 5,566 5,363 5,389 5,389 5,549 15.3
Transfers/Grants/Fin. 3 3 3 3 3 .09
Fleet Costs 107 74 93 85 89 .2
Program Facility Costs 3,309 3,572 3,155 3,664 3,605 9.9
Other Internal Costs 147 66 152 80 80 .2
Total Expenditures 33,965 31,355 34,672 34,696 36,281 100
FTEs 452.42 452.42 452.42 452.42 456.52

The OPL has limited capacity under the provincial legislation to generate revenues
through fees and fines. The legislation states “a board shall not make a charge for
admission to a public library or for use in the library of the library materials”. This
includes reserving and borrowing circulating materials and using reference and
information services. It is estimated that $2.1 million in fees will be collected in 2008 in
addition to a provincial grant of $1.38 million.
The 2008 approved operating budget represents a $1.3 million (4.3%) increase over the
2007 budget. The OPL budget accounts for 1.6% of the total 2008 operating budget of
the City.

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