State Auditor Update – Debbie Pennick - HFMA WA

State Auditor’s Office Update
Healthcare Financial Managers Association
WA-AK Spring Conference
May 1, 2013
Debbie Pennick, CPA, Program Manager
Topics
1. Troy Kelley, State Auditor
2. Auditor Kelley’s Objectives and Short Term Priorities
3. Local Government Performance Center
4. Other Tools & Resources
5. Performance Audits
6. Audit Results
7. Emerging Issues
2
Troy Kelley, State Auditor
• Three term legislator
• Chaired Joint Legislative Audit and
Review Committee
• Led audit teams at SEC
• Worked on white collar crime in federal
prosecutor’s office
3
Auditor Kelley’s Objectives for the Future
• Ensure SAO efforts contribute to government
working better and costing less
• Continually improve internal operations and
capacity to produce high-quality work
• Ensure SAO employees feel valued and highly
satisfied in their work
• Ensure SAO work helps government deliver high
value, which earns greater public trust
4
Auditor Kelley’s Short Term Priorities
• Develop a communications strategy and plan
• Clarify the scope of accountability audits
• Connect the Local Government Performance
Center with the Audit Division
• Edit the existing mission statement to more
clearly communicate mission and values
• Pursue identified improvements to internal
processes
5
Local Government Performance Center
www.sao.wa.gov/performancecenter
6
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.
• We believe that 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.
7
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.
1) An online resource center with tools and examples.
2) Training on how to improve government services.
3) 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
8
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.
9
Three 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) Citizen engagement tools and resources
• Pilot citizen survey project with Walla Walla, creating a model.
• Training on how to engage citizens and increase transparency.
3) 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.
• “Lean Academy” with Clark, Island, Whatcom, and Douglas Counties
10
Example 1: Staffing analysis tools & training
Questions local government leaders ask:
How do we know if we have the right number of staff to cover a post on a
24/7 schedule?
• Calculating an appropriate relief factor
• Anticipating and budgeting for hidden costs
How do we know if we’re paying too much in overtime?
• Analyzing overtime data: who is using it, and why?
• Correctly calculate and compare the costs of overtime vs adding
another full or part-time employee
• Tips for monitoring and managing overtime pay
11
Example 1: Staffing analysis tools
Determining coverage
In our workshops, we review
ways to calculate leave to
factor into evaluation.
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.
12
Example 1: Staffing analysis – Overtime management
Reevaluating overtime
Managing overtime is
important for assessing
staffing levels and needs.
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.
13
Example 2: 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.
14
Example 2: Engaging citizens in setting priorities
City of Walla Walla services: Importance by performance
Source: Elway Research, Inc.
15
Example 2: What matters most to citizens?
City of Walla Walla:
Relative gaps between
importance and
performance
Source: Elway Research, Inc.
16
Example 3: 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 71% (down to 6 days)
• Clark and Island Counties have now completed our “Lean
Academy” to help streamline their permitting offices and
Whatcom and Douglas began training in March.
• Case studies, videos, and “how-to” tools will be posted on our
website, and more training will be offered this year.
17
Example 3: Lean Academy in Kitsap County
18
Example 3: Lean Academy in Kitsap County
19
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.
20
Local Government Performance Center Trainings
The Center trained almost 1,200 people at sessions across Washington
21
Other Tools and Resources – Subscription Service
22
Other Tools and Resources – Client HelpDesk
23
Other Tools and Resources – Client Resources
24
Other Tools and Resources – The Audit Connection
25
Performance Audits
Audits recently released:
Ferries Construction
Identified reasons Washington ferries cost more than other vessels.
Regulatory Reform
Suggested ways the state could improve regulatory websites and how
agencies streamline regulations.
Protecting Children from Sex offenders in Schools, Day Care and Foster Homes
Recommended ways the state can better prevent sex offenders from living
or working around children.
K-12 Education Spending
Reviewed non-instructional spending in all of the nearly 300 school districts
and found promising approaches schools are using to reduce costs.
26
Performance Audits
Upcoming audits:
Developmental Disabilities Evaluation
Reviewing the state program providing services for people with
developmental disabilities.
Payments for Developmental Disabilities Services
Reviewing Medicaid claims for supported living services provided to
developmentally disabled clients.
Background Checks
This audit is reviewing how the state could improve background check
procedures.
Medicaid Managed Care Programs
This audit is examining claims with the highest potential risk for
overpayments.
27
Common Audit Findings
• MRSC Insight blog posts from January 17 and February
25, 2013
• Analyzed audit findings for the period from January 2010
– December 2012
• Information addresses findings from all types of audits
• Financial statement audits
• Federal single audits
• Accountability audits
• Separate breakdown for cities, counties and special
purpose districts
28
Types and Frequency of Audit Findings
Issue
Number of
Findings
Percent of
Total
Lack of Adequate Internal Financial Controls
74
33%
Lack of Adequate Controls to Ensure Compliance with
Federal Grant Requirements
71
32%
Decline in Financial Condition Due to Lack of
Monitoring or Failure to Reduce Costs
26
12%
Misappropriation of Funds
14
6%
Irregularities in Purchasing, Bidding, Contracting
12
5%
Issues Related to Allocation of Internal Service Costs
10
4%
Assets and Equipment – Inadequate Reporting or
Controls
7
3%
Irregularities in Interfund Loans or Transfers
7
3%
Other
4
2%
Total
225
100%
29
Types of Hospital Audit Findings
30
Financial Condition
• We see financial decline in large and small
governments
• Financial distress is experienced in 15 of the 35
local government types
• We have reported financial decline in 4 percent
of the 2,190 active local governments in the
state.
• We currently see the most significant decline in
cities and towns
31
Financial Condition Contributing Factors
Unprecedented economic conditions:
• Declining federal and state funding
• Declining property values
Governing Board not engaged or taking action:
• Lack of monitoring/oversight
• Not receiving accurate or timely financial
information
• Exceeding budgets
32
Financial Condition by Entity Type
33
Financial Condition Statewide
34
Financial Condition Indicators
35
Financial Condition – What to Do
 Learn from peers who are not experiencing financial
distress.
 Establish a formal, comprehensive plan that includes
detailed financial benchmarks and guidelines to
specifically target cash flow issues.
 Closely monitor and evaluate the financial activities to
ensure the plan is being followed and the desired
results achieved.
 Ensure timely and accurate financial information is
provided to the Board in order to facilitate informed
decision making.
 Take prompt action to manage operations within
available resources.
36
Financial Statement Controls
District management must design and follow
internal controls that provide reliable financial
reports.
• RCW 43.09.200
• BARS Manual Part 3, Accounting
Auditors should report material weaknesses and
significant deficiencies in these internal controls.
• Statement on Auditing Standards No. 115
• State Auditor’s Office Audit Policy Manual
37
Control Weakness Indicators
• Lack of sufficient knowledge and understanding of the
accounting/reporting system
• Unsupported adjustments and journal entries
• Unsupported/unusual basis for accounting estimates
• No process to identify/report significant
• subsequent events
• related parties
• extraordinary transactions
• No action to correct identified errors
• Lack of a review process to ensure the accuracy of the
financial statements
38
Financial Statement Controls – What to Do
Ensure staff have adequate training.
Prioritize and dedicate sufficient resources
to the financial statement preparation
process.
Adopt formal financial statement
preparation policies.
Develop a financial statement review
process that ensures accuracy.
39
Emerging Issues
Electronic Banking
Expanding activities/operations
beyond authority
Joint operations/activities and
affiliation agreements
40
Contacts
Troy Kelley
State Auditor
(360) 902-0360
[email protected]
Chuck Pfeil, CPA
Director of State and Local Audit
(360) 902-0366
[email protected]
Debbie Pennick
Audit Manager,
Team Inland Northwest
(509) 334-5825
[email protected]
Website: www.sao.wa.gov
Twitter: www.twitter.com/WAStateAuditor
41