Performance Audit of Capital Budget Processes

Proposed Final Report

February 8, 2005

Joint Legislative Audit and Review Committee Karen Barrett & Isabel Muñoz-Colón

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Audit Background

Other Capital Budget

Programs

$6 billion

53% of total

(primarily grants and loans to support local government

projects)

Small State Facility Projects

$2 billion

17% of total

Major State Facility Projects

$4 billion

30% of total

$12 Billion in Capital Spending Between 1995 and 2004

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Assess Strength of State’s Capital Budget Processes

Study Conclusions in Brief:

Agency Planning

Agency Execution

OFM’s Oversight ConcernsConcerns

OFM is not well positioned for front- end project review. Improvement depends on greater clarity about the Capital Division’s role, priorities and resources.

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Oversight Activities at OFM

Assessment:Assessment: OFM spends time further on the cost cost continuumcontinuum with agencies at points where the greatest opportunity to influencegreatest opportunity to influence major projectsmajor projects has passed.

Why? Why? It is a result of OFM’s workloadworkload compared compared toto the Capital Division’s resourcesresources (2-3 analysts).

The biggest driving factors are: Allotments (agency spending plans) Information Systems.

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Workload vs. Resources: Allotments

OFM’s activities are heavily weighted toward OFM’s activities are heavily weighted toward managing construction allotments; also managing construction allotments; also challenged to execute requisite work efficiently.challenged to execute requisite work efficiently.

Contributing Factors:Contributing Factors:

Lack of benchmarks, procedures, and historical Lack of benchmarks, procedures, and historical performance information;performance information;

Review time is increasing; andReview time is increasing; and

Reliance on allotments to learn about major projects. Reliance on allotments to learn about major projects.

See Appendix 8, pg. 71 6

Workload vs. Resources: Information Systems

Weak management information systems make project Weak management information systems make project analysis more time consuming and do not support analysis more time consuming and do not support investment oversight well.investment oversight well.

Contributing Factors:Contributing Factors: Data does not readily support evaluation of agency Data does not readily support evaluation of agency

proposed budgets and performance.proposed budgets and performance.

Key benchmark data, costs, and space standards are not Key benchmark data, costs, and space standards are not kept current. kept current.

OFM lacks internal procedures to guide new analysts OFM lacks internal procedures to guide new analysts through advancing projects. through advancing projects.

See Figure 6 & 7 on pgs. 24-25 7

JLARC Tools to Manage Workload

Portfolio of Major Projects (200+) Portfolio of Major Projects (200+) Gives analysts a way to manage projects through a

multi-year capital process.

Project Performance Indicators & BenchmarksProject Performance Indicators & Benchmarks Gives analysts a way to focus their work and know

when projects are ready to proceed.

OFM could refine these tools to monitor OFM could refine these tools to monitor performance and identify problem areas on a performance and identify problem areas on a statewide basis. statewide basis.

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JLARC Recommendation:

OFM should develop a plan in consultation with fiscal committees OFM should develop a plan in consultation with fiscal committees and agency capital officers to address weaknesses in oversight and agency capital officers to address weaknesses in oversight outlined in this report.outlined in this report.

The plan should address the following issues: Aligning resources to program workload;

Identifying and institutionalizing procedures and best practices;

Creating easily accessible, reliable information systems;

Developing statewide performance measures for capital projects; and

Evaluating projects earlier in the planning phases.

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Agency Response:

The Office of Financial Management The Office of Financial Management Concurs Concurs

Next Steps?

April 2005 – Progress on improvement plans developed with legislative fiscal committees.

January 2006 – Present and discuss finished plan