Written by Matt Weller, Oklahoma City, OK, 

Initially we planned to audit Oklahoma County’s administration of Oklahoma City’s property tax revenues, which are used to service GO Bonds.  Oklahoma City primarily uses proceeds from GO Bond issuances to finance street, bridge, and drainage improvements.  During the planning phase of our audit we discovered that GO Bond funds were accumulating.  The City’s Public Works Department is responsible for implementing the GO Bond and other capital programs, including design, management, construction and oversight of projects.

Since 1989, the citizens of Oklahoma City approved GO Bonds totaling $715 million. Also since 1989, the citizens of Oklahoma City approved two limited-purpose City sales tax programs to fund downtown facilities renewal and public school improvements.  From 1995 through 2003, 60% of the expenditures for capital programs administered by Public Works related to projects funded by the two limited-purpose sales tax programs while only 30% related to the GO Bond program.  Oklahoma City’s GO Bond fund balance more than doubled from $63 million in fiscal year 1995 to $157 million in fiscal year 2004.  GO Bond fund balance increased because expenditures did not keep pace with GO Bond issuances.  As illustrated in the following graph, GO Bond fund balances were projected to reach $217 million at the time of the next scheduled bond election in fiscal year 2007 which is equivalent to about 2/3rds of the largest GO Bond authorization in the City’s history.

 

Oklahoma City found itself in an unusual situation for most local governments…more capital funds available than could apparently be spent. Further, the situation would translate to significant delays in essential infrastructure improvements that were promised to citizens and erode citizen confidence in the City’s ability to keep their promises to citizens.  Rather than audit tax administration, we set out to determine how to solve the problem of having more capital funds available than we could spend.

An assessment of remaining GO bond funds on-hand and GO Bonds authorized for issuance found that the largest portion related to street projects.  We found that the number of project managers responsible for these projects had been steadily reduced since 1995. Based on an assessment of GO Bond project expenditures and time worked on GO Bond projects for the last three years, we estimated it would take an astounding 17 years to complete existing authorized and funded street projects.

An assessment of overall GO Bond program management found multiple deficiencies including:

• Lack of a schedule for completion of GO Bond projects.
• Inadequate GO Bond management reports and an ineffective reporting process.
• Incomplete internal billings for staff time spent on GO Bond projects.
• Inefficient allocation of GO Bond funds to projects.
• Project engineering costs paid by other funds were not reimbursed by the GO Bond fund.
• GO Bond program oversight responsibilities were not assigned to specific personnel.

Our assessment led us to the conclusion that additional staffing for the GO Bond program was warranted, but program management improvements were needed before an appropriate staffing level for the program could be determined.  We recommended phasing in additional staff on street improvement projects over a three-year period. In our view, phasing in additional staff on street projects would mitigate the risk of over staffing by allowing time for management to address program-level deficiencies, evaluate project-level management procedures, and would devote additional staff to the portion of the GO Bond program where the most GO Bond monies remain and where staff had been steadily reduced over the past 10 years.

City management responded positively to our recommendations and immediately took several measures to improve program management.  A GO Bond program work section was created in the Public Works Department, including the creation of a GO Bond Program Manager position to manage the program and the addition of four project manager positions.  Project manager staff assignments were clarified and regular status meetings are held to improve the consistency of project management and communications.  An oversight committee consisting of executive level City personnel was established to review all major program level decisions. Additionally, an outside financial advisor was engaged to establish standardized quarterly budget and schedule reports, develop recommendations to improve program efficiencies and program management, identify benchmarks and best practices and develop recommendations for appropriate fund balance levels.

Significant to management’s response to our findings was the development of goals for GO Bond project delivery for each fiscal year.  Management established a goal of $60 million in GO Bond projects for the first fiscal year after the audit.  Management exceeded this goal, by achieving $71 million in GO Bond project work for that fiscal year. For the next fiscal year, management increased the target to $72 million.  Additionally, the outside financial advisor has been consulted to determine additional staffing needs and program refinements necessary to continue meeting the goals that have been established.

Management is now actively managing the program to complete infrastructure projects.  Often, as auditors, we are told that program results are not possible because resources are not available.  This story serves as an important reminder that in many cases lack of resources is not the reason for poor program performance, but lack of management of available resources.