Memorandum

City of Lawrence

City Auditor

TO:	Members of the City Commission
FROM:	Michael Eglinski, City Auditor
CC:	David L. Corliss, City Manager Cynthia Boecker, Assistant City Manager Diane Stoddard, Assistant City Manager Jonathan Douglas, Assistant to the City Manager
Date:	June 4, 2009
RE:	Performance Audit Work Plan for Remainder of 2009

This memo includes background information on the process I used to identify potential audit projects; six potential performance audit topics identified as high priority; and information about on-going work.

City Code requires the City Auditor to coordinate with the City Manager in creating an annual work program, to annually present the proposed work program of planned major audits and planned special projects to the City Commission.  The City Commission may amend or alter the work program as it deems appropriate.

Process for developing performance audit topics

To identify and prioritize potential performance audit topics, I followed general principles that topics would be:

• Of importance to residents and the organization;
• Provide information to help develop annual audit plans for future years;
• Provide opportunities for the audit function to interact with many departments; and
• Have a defined scope, making the audit work most manageable.

I collected information from several sources.  I reviewed completed performance audit reports; reviewed the budget, employee survey and citizen survey; solicited suggestions from members of the public through a web-based form; and discussed ideas with city staff, including the City Manager.

Priority performance audit topics

I would suggest the audit plan for the remainder of 2009 include four or five projects.  I would recommend that those projects include the Financial Indicators and the Review of Purchasing Card Transactions.  Remaining projects could be selected from the priority list or the City Commission could identify other topics.

	Performance Audit	Details
A	Financial Indicators	Reviewing a set of financial indicators, comparing them over time and with medians, to describe the city’s financial condition and identify “warning trends.” The performance audit would involve updating the analysis done last year.  Because the project would involve updating an approach used previously, it could be completed quickly.  Updating the analysis was identified as a topic for future work in the performance audit released in August 2008.
B	Review of Purchase Card Transactions	Following procurement policies and procedures helps ensure city funds are spent responsibly.  In 2008, city employees spent about $1.5 million on small purchases made with city-issued Visa purchase cards. The performance audit would involve reviewing a small number of transactions made by city employees who have purchase cards.  The review would focus on compliance with city policies and procedures, ensuring the purchase addressed a reasonable need, and ensuring the goods or products purchased were received by the city. A January 2009 performance audit concluded the design of the city’s process for making small purchases generally followed good practices.  The performance audit identified reviewing transactions as potential future audit topic.
C	Planning and Development Services	In the 2007 citizen survey, respondents identified the quality of planning and development as one of the top three areas the city should most emphasize in coming years.  Nearly half of the residents who expressed an opinion were dissatisfied with how well the city is planning for growth. A performance audit could involve: Following-up on recommendations from the 2006 Matrix study the city’s development review process; or Surveying applicants about their experiences and opinions of the processes; or Reviewing a number of project files to understand the process and identify potential improvements; or Evaluating city staff approaches to balancing competing interests and identifying and implementing process improvements; or Surveying practices in similar cities to identify issues, performance measures and approaches, and good practices. This performance audit could address suggestions submitted by members of the public when I solicited ideas for future topics.
D	Business Type Services: Water and Sewer, Stormwater, Parking, Solid Waste, and Golf Course	Several city functions – including water and sewer, stormwater, parking, solid waste, and golf – are largely funded by charges for service.  Comparing financial performance for those activities with similar activities in similar cities could identify areas where performance could improve. An August 2008 performance audit noted the decline in net revenue for all five business-type activities from 2006 to 2007.  The 2008 Comprehensive Annual Financial Report shows declines in net revenue for all of the activities except stormwater. This performance audit could address suggestions related to solid waste practices submitted by members of the public when I solicited ideas for future topics.
E	Vendor Information Review	The city maintains information about vendors in the financial system.  Accurate and complete information acts as a control to ensure appropriate payments.  A performance audit could involve reviewing the city’s vendor table, testing for accuracy and completeness. This performance audit would address a suggestion submitted by a member of the public when I solicited ideas for future audit topics.
F	Contract Monitoring	Following good contract monitoring practices helps ensure the city gets what it wants at an appropriate price. Audit work would involve reviewing a number of contract files from different departments and comparing them with good practices, identifying any gaps.  The audit could identify areas for further audit work.

Other work

I have two on-going performance audit projects:

Police administrative bureau preliminary review – The project was approved by the City Commission in April 2008 and involves reviewing the Police Department’s administrative bureau to identify topics that could warrant further audit work.

Recommendation follow-up – The City Code requires follow-up reporting, which provides the City Commission with information on management’s efforts to implement audit recommendations.  A follow-up report was provided in March 2009.  I plan to provide the next follow-up report to the City Commission in September 2009.

In addition to performance audit projects, I attend approximately 40 hours/year of continuing professional education to satisfy Government Auditing Standards, participate as a board member in the Association of Local Government Auditors, and participate as the local government audit representative to the executive committee of the Mid-America Intergovernmental Audit Forum.

Action requested

Approve performance audit work plan for the remainder of 2009.