Potential performance audit topic

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 16, 2011
RE:	Performance Audit Work Plan for the Remainder for 2011

City Code requires the City Auditor to coordinate with the City Manager in creating an annual work program and to present the proposed work program to the City Commission. The City Commission may amend or alter the work program as it deems appropriate.

The general principles I followed to identify and prioritize audit projects were to look for topics that:

Are of importance to residents of Lawrence and the organization;
Could provide information to help develop annual audit plans for future years;
Encourage and support performance measurement and financial controls;
Have a defined scope, making the audit work most manageable.

To develop the potential topics, I reviewed previous work and audit plans, reviewed the 2011 citizen survey, discussed audit topics with stakeholders in city government, reviewed suggestions received throughout the year, and discussed proposed topics with the City Manager.

The table lists ten high priority performance audit projects. I’ve also included a list of 20 additional potential performance audit topics that were identified but considered lower priority.

My recommendation to the City Commission would be that the performance audit plan include the financial indicator analysis (D) and 3-4 additional projects. In addition, I will provide a 6-month audit recommendation follow-up memo required by the City Code.

I am currently working on two performance audit projects and participating as a non-voting member of the Solid Waste Task Force. The current projects involve analysis of street specifications and review of vendor information retained in the city’s financial accounting system.

	Potential Topic	Details
A	Barriers to more performance measurement and reporting	Measuring and reporting on government performance can help stakeholders evaluate the city’s activities. A performance audit could identify barriers to implementing more measurement and reporting and make recommendations to reduce the effect of those barriers.
B	Capital planning and budgeting	Capital assets include streets, buildings, water and sewer lines, storm water systems, and city equipment. These assets are important to the city’s future financial condition and to the ability to continue to provide services. Citizens identified maintenance of streets and infrastructure as the major area that should receive the most emphasis in coming years in the 2011 citizen survey. A performance audit could compare the city’s processes for planning and budgeting with practices recommended by the Government Finance Officers Association. This project was included in the 2010 audit plan but not completed.
C	Cash handling	Handling cash is inherently risky for the city. Well designed cash handling procedures can reasonably assure the city that cash and records are safeguarded and that discrepancies will be identified. A performance audit could involve reviewing existing cash handling policies and procedures and testing transactions. A performance audit could focus on one or more cash handling locations.
D	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 analyses from prior years.
E	Library construction	The planned library construction project is a new, visible, large and complex project. A performance audit could evaluate the city’s established approach to project management.
F	Parks and Recreation fees	Parks and Recreation collects user fees for a variety of recreation programs. Many residents use recreation programs and attend recreation facilities. Based on the 2011 citizen survey, 36 percent of respondents had enrolled in a recreation program and 72 percent had visited a city recreation facility in the last year. A performance audit could review recent fee changes and assess the impact of fee changes on attendance.
G	Police workload	When workload and resources balance, the Police Department is in the best position to provide services efficiently and effectively. In March 2011, the Police Department identified a need for about 30 additional positions, a 17 percent increase in the current level of staffing. In a 2008 employee survey, police employees expressed concern with workload and noted that workload limited their ability to do their jobs right. A performance audit could involve reviewing how management measures workload and matches workload and resources; how initiatives like mobile data computers affect workload; and how the department has managed demand for services.
H	Rental registration program	A representative of the University of Kansas identified the topic in a letter to the City Manager in May 2011. A performance audit could review existing ordinance and efforts to address rental properties and neighborhood conditions. A performance audit could also review practices in other communities with large universities.
I	Utilities – controlling taste of water	Citizens identified the taste of drinking water as the water/waste water issue that should receive the most emphasis in coming years in the 2011 citizen survey. A performance audit could evaluate management’s approach to monitoring and controlling the taste of drinking water and make comparisons with similar water utilities.
J	Utilities – system development charges	Customers making new utility service connections pay system development charges. The charges are for design, construction and improvement costs for the utility. The city annually reports on the receipt and expenditures of system development charges. A performance audit could review the method of tracking and reporting on system development charges to ensure compliance with the City Code.

Other potential audit topics identified during the selection process include:

· City-County financial and operational relationships

· Condition of public buildings

· Downtown parking

· Financial policies

· Flow of traffic (high priority in 2011 citizen survey)

· Golf course finances

· Implementing full cost accounting for solid waste

· Outside agencies

· Overtime controls

· Park and Recreation fee waivers and scholarship fund

· Pavement markings

· Purchase card transaction reviews

· Record retention

· Risk assessment survey of department and program managers

· Safety and workers compensation

· Security/safety at city facilities

· Sewer backups

· Solid waste rate structure

· Span of control analysis

· Vehicle and equipment replacement