State Auditor’s Office Local Government Update

1. State Auditor’s Office Local Government Update Local Government Performance CenterLocal Government Audits & AccountingPresented to Washington Association of County Officials ConferenceOctober 5, 2012Larisa Benson, Director of Performance Audit Chuck Pfeil, CPA, Director of State & Local Audit

2. Local Government Performance CenterMaking government work better and cost lessPresented to Washington Association of County Officials Conference October 5, 2012Larisa Benson, Director of Performance Audit

3. Slow economic recovery causing pain • Governments dependent on tax revenues see their tax base shrinking in a down economy • Voters, also feeling the pressures of the economy, demonstrate strong anti-tax sentiments • Meanwhile, rising caseloads actually increase the demand for government services • Unprecedented levels of fiscal austerity cause leaders to ask: Have we cut all we can? What do we do now? Is it possible to do more with less? How can we do less with less – what choices and tradeoffs must be made? • Using performance data to inform tough budget decisions sounds like a good route . . . but it’s not as easy as it sounds. • Could the tools and techniques that performance auditors use help local government leaders make more informed decisions and use the opportunity in the crisis to improve government services?

4. A new resource for local governments • In this challenging environment, governments need precise and practical information to make important decisions. • We created the Local Government Performance Center to offer help using performance management strategies. • All organizations can use performance-based techniques to improve how they: • Evaluate and improve programs • Prioritize resources and increase efficiency • Engage citizens and be more responsive to customers

5. Why the State Auditor’s Office? • As performance auditors, we conduct research and use tools that, if shared more broadly, could help many local governments reduce their costs and improve performance. • Sometimes an independent perspective and expertise from outside the organization can help you see and do things differently. • By sharing what we know through this project, we can reach more governments faster and cheaper than by doing one local government audit at a time.

6. Improved Government Performance: A Shared Goal The Local Government Performance Center within the State Auditor’s Office offers tools and training to help local leaders who want their governments to work better, cost less, and improve the value of their services to citizens. • An online resource center with tools and examples. • Training on how to improve government services. • Customized on-site training sessions (on request and within available resources). Our goal: better results for citizens and customers at lower cost to government and taxpayers

7. Where to find us on the website

8. Local government experts from across Washington • The leadership and technical advisory panels include: • 12 county representatives • 14 city representatives • 6 representatives from resources and universities, including WACO • Varied positions bring important perspectives: • Directors or managers of budget, finance, public works, public health, community relations, information technology, community development, performance • 7 elected officials – including four commissioners • 2 deputy county executives

9. Local government leaders guide our way Leadership & Technical Experts Group

10. Local government leaders told us what they need • 1) Evaluating operations and services • Understanding and using effective performance measures • Setting targets/benchmarks • Staffing analysis and models • 2) Managing and improving performance • Building logic models that explain what government does and why • How to manage with performance measures and data • LEAN and other process improvement methodologies • Alternative service provision models, tools and success stories • Performance-based budgeting • 3) Communicating with citizens • Engaging citizens in setting priorities and solving problems • Using social media in local government • How to create and use dashboards/scorecards

11. Five examples of what we’re doing 1) Staff analysis training and tools • Help government leaders evaluate costs of overtime versus adding staff • Training formats include classroom style, webinar, and on-site 2) Turning a completed audit into a management tool • Sharing lessons learned from a recent state audit in a checklist format helps governments save money on cell phone costs 3) Citizen engagement tools and resources • Pilot citizen survey project with Walla Walla, creating a model • Training on how to engage citizens and increase transparency 4) Performance measure training and assessments • Training on performance measures plus auditor assessments of how local governments use performance data and ways they can improve 5) Demystifying tools like “lean management” • Training plus creating a peer-support network to help governments learn and use process improvement methods to develop faster, cheaper delivery systems

12. Example 1: Staffing analysis tools & training Questions local government leaders ask: • How do we know if we have the right number of staff? • What’s the best way to calculate the FTEs to cover a post on a 24/7 schedule? • How do we know if we’re paying too much in overtime?

13. Example 1: Staffing analysis - Modeling Elements of a Sound Staffing Model • Does the staffing model have solid information about the work being done? • Does it provide points of comparison, such as historical workload levels and costs by site/work unit? • Is the level of staffing resources clearly related to meeting workload requirements or service level goals? • Has the model been validated to check its accuracy? • Is its design consistent with best or leading practices?

14. Example 1: Staffing analysis – Coverage and overtime How do we know if we have the right number of staff to cover a post on a 24/7 schedule? • Calculating appropriate relief requirements • Anticipating and budgeting for hidden costs • Why the relief factor doesn’t always work well How do we know if we’re paying too much in overtime? • Analyzing overtime data: who is using OT, and why? • What is “Good” vs. “Bad” overtime? • Correctly calculate and compare the costs of overtime vs. adding another full-time employee.

15. Example 1: Staffing analysis – overtime management Strategies to more effectively manage overtime costs • Calculate and compare the fully burdened hourly cost of OT and straight time – how different are the costs? • Analyze overtime data – who is using it and why? • Review OT approval policies and processes - do criteria exist for acceptable OT use? • Analyze leave policies – is annual leave being closely managed? • Analyze unscheduled leave use – trends? • Examine Comp Time policies – controls in place? • Look for potential economies of scale – possible to pool staff?

16. Example 1: Staffing analysis – Online tools • Two-page online tool highlights the difference between “good” and “bad” overtime use • Elected official audience • The format is designed to help elected officials and decision makers ask the right questions

17. Example 1: Staffing analysis tools • Determining coverage • In our workshops, we review ways to calculate leave to factor into evaluations • Downloadable template • This example uses the average leave per law enforcement officer to calculate how many FTEs are required • Using available data • These tools use data governments already have

18. Example 2 – From the audit comes the cost savings tool • Our November 2011 performance audit helped the state save $1.7 million, or almost 20% of its total cell phone bill. • We summarized and translated our recommendations into an online tip sheet: • Compare actual usage to current rate plans • Consider using pre-paid phones vs. calling plans • Consider joining purchasing cooperatives • Negotiate with cell phone providers • Evaluate the pro’s and con’s of using an employee stipend policy • Local governments used our idea to get better results: • Pierce County discovered most phones were rarely used, but the county was paying for higher-use plans: the average phone used 67 minutes and covered for 600 minutes. • The county is using this information to negotiate better plans and lower costs.

19. Example 2 – Questions to ask to cut costs

20. Example 3: Helping governments engage citizens • We provide tools and training that help cities and other organizations communicate with their residents. • Training on citizen engagement strategies • Citizen-driven prioritization of resource allocation and process improvement efforts help governments focus on “what matters most” • Citizen surveys • Helping the City of Walla Walla develop and analyze a citizen survey • Developing a survey template other governments can use • Guidance using the results to inform decisions

21. Example 3: Engaging citizens in setting priorities Source: Elway Research, Inc.

22. Example 3: What matters most to citizens? Source: Elway Research, Inc.

23. Example 4: Performance measure assessments Cities and counties have asked the Local Government Performance Center to review how they use performance measures and offer guidance. We provide on-site training to help managers and analysts improve performance-based strategies. Current projects include assessments for the City of DuPont and the Thurston County Sheriff’s Office. Our assessment of Pierce County’s performance measures is available on our website.

24. Example 4: Thurston County Sheriff’s Office Assessment Great data about workload management can be hard to read ?

25. Example 4 – Front desk data presented another way This measure looks at demand for one application over time.

26. Example 4 – Thurston County burglaries per month by sector Great data on burglaries in each sector – all sectors look the same.

27. Example 4 – Burglary data presented another way The data shows sectors A and B usually report more burglaries.

28. Example 5: Using Lean principles • Kitsap County redesigned their permit process for Single Family Residences using lean management techniques: • Front line employees involved in redesign effort • Extensive on-site training assistance • Their new process reduces the time it takes to make a permitting decision by 77% (down to 6 days) • Kitsap County is now featured in our “Lean Academy” pilot to help three more jurisdictions streamline their permitting offices. • Case studies, videos, and “how-to” tools will be posted on our website, and more training will be offered in 2013.

29. Example 5: Lean Academy benefits BEFORE – Kitsap County single family residence permit process

30. Example 5: Using Lean principles AFTER – Kitsap County single family residence permit process

31. Why should we do this? Our vision is to create a place where government leaders who are committed to achieving cost savings and better results can learn from and support one another. By participating, local governments can: • Learn new ways to deliver better results and give citizens a better return on their tax dollars. • Receive information and technical assistance from performance experts at no cost to their organization. • Share ideas, challenges, and resources with other government leaders who face similar challenges.

32. What does it cost? • The Center is funded through the state performance audit program, which was established in the Auditor’s Office following voters’ approval of Initiative 900 in 2005. • A small fraction of the performance audit budget is dedicated to this effort. • There is no charge to governments. • This is a pilot effort – we will be evaluating whether it’s working or not, and whether we can meet demand.

33. New roles bring new challenges Partnering with the State Auditor’s Office TRUST

34. How can you stay informed? • Email performance@sao.wa.gov • Roxanne Lowe, Project Coordinator (360) 725-9722 • Get real-time updates – and offer your input – on Center development through @LocalGovPerform. (Twitter account facilitated by FLT Consulting.)

35. Upcoming Performance Center projects New Website: The Center will roll out a new and improved website with more tools in November • Remember this site: www.sao.wa.gov/performancecenter. Lean Academy: The Center is hosting a training for three governments on Lean performance on October 25. Training sessions: The Center is providing sessions open to all governments in Chelan on October 18 and November 7 Webinars: Staffing analysis October 12 and communicating with citizens November 30

36. Auditing and Accounting Update Presented to Washington Association of County Officials Conference October 5, 2012Chuck Pfeil, CPA, Director of State and Local Audit

37. Audit & Accounting Topics • Audit Frequency • Proposed Federal Audit Changes • Recent SEC Report • Public Development Authorities & Public Facility Districts • Local Government Financial Condition

38. Audit Frequency • State Auditor’s Office reassessing Accountability Audits in schools, cities and counties. • Current school cycles: • 85 annual • 120 two year • 41 three year • 49 limited-scope accountability audits (audit assessments)

39. Audit Frequency • Over 110 schools offered less frequent audit • About half accepted • Counties and cities currently being evaluated

40. Proposed Federal Audit Changes  OMB considering Federal Audit changes: • Higher audit threshold • Fewer compliance requirements • Focus on improper payments, fraud, errors and waste • Higher questioned cost threshold

41. Securities & Exchange Commission Report on Municipal Securities Market July 31 report issued http://www.sec.gov/news/studies/2012/munireport073112.pdf • Seeking expanded authority including: • Setting issuer disclosure requirements • (timeframe, frequency, content) • Establishing the form and content of financial statements

42. Public Development Authorities & Public Facility Districts •  Many do an effective job • When we find problems they center around: • The creating entities not monitoring the PDA/PFD operation • The governing boards not monitoring their own activities • Declining or distressed financial condition • Non-compliance with laws and regulations • Summary report on our PDA/PFD audits

43. Local Government Financial Condition • Seeing financial distress in both large and small governments. • Conditions looked for in our audits: • Declining/negative fund balance • Expenditures exceeding revenues • Lack of adequate management action/oversight • Reliance on interfund loans • Reliance on registered warrants • Increasing or high debt • Reliance on unsupported cost allocation • Contingent liability • Failed levy • Pending litigation

44. Local Government Financial Condition • Reported on financial condition in 15 of 35 types of local governments • Increase in number of governments and conditions • Notable change in cities and towns • Improvements in some governments • Southwest Washington has largest number

45. Local Government Financial Condition

46. Contacts Brian Sonntag, CGFM State Auditor (360) 902-0360 Brian.Sonntag@sao.wa.gov Larisa Benson Director of Performance Audit (360) 725-9720 Larisa.Benson@sao.wa.gov Chuck Pfeil, CPA Director of State & Local Audit (360) 902-0366 Chuck.Pfeil@sao.wa.gov Website:www.sao.wa.gov Twitter: www.twitter.com/LocalGovPerform