Description
Budgeting refers to the setting of the expenditure with respect to the organization’s core function which is responsible for the overall functionality of the firm.
Capital Budget Process
Report to the Joint Legislative Audit and Review Committee
OFFICE OF FINANCIAL MANAGEMENT DECEMBER 2005
TABLE OF CONTENTS
Executive Summary .....................................................................................................1 Capital Process Review – Objectives ..........................................................................3 Proposals to Address Objectives Identified .................................................................4 Improve Budget Development Work Plan – (Objectives C & E) ..............................11 Performance Measures and Guidelines Work Plan – (Objective A) ..........................13 Facility Condition Information Work Plan – (Objective H).......................................14 Funding Sources Work Plan – (Objective B) .............................................................16 Improve Allotment and Monitoring Work Plan – (Objective F)................................17 Streamline Budget Bill Work Plan – (Objective I).....................................................19 Capital Review Process Timeline – (Chart) ...............................................................20
EXECUTIVE SUMMARY
In February 2005, the Joint Legislative Audit and Review Committee (JLARC) issued a performance audit report on the state’s capital budget process. The report recommended that the Office of Financial Management (OFM) develop a plan to address shortcomings in the capital budget process. Specifically, we were asked to: • • • • • Align resources to program workload; Identify and institutionalize procedures and best practices; Create easily accessible, reliable information systems; Develop statewide performance measures for all capital projects; and Evaluate projects earlier in the planning phase.
The JLARC report focused on “major projects.” Knowing that OFM, the Legislature, and state agencies need better ways to collect and analyze data, OFM decided to evaluate the entire process, and not confine our review to “major projects.” OFM submitted an interim report to JLARC in April 2005. This report included a work plan to analyze current processes, interview stakeholders, identify process improvements, and develop timelines to implement the changes. Our focus was to identify the strengths and weaknesses of the current capital budget processes, delineate needs and expectations, and make recommendations for change that satisfy legislative and executive decisionsupport requirements. Emphasis was placed on improving management systems, streamlining business processes and policies, and strengthening service delivery and accountability throughout state government. The members of the project team are Steve Masse, Craig Olson, and Debbie Hoxit. Before we began our research, we established an advisory group consisting of the following members: • • • • • • • • Brian Sims, Senate Ways and Means Committee Susan Howson, House Capital Budget Committee Mike Roberts and Tom Saelid, OFM Capital Budget Lynne McGuire, OFM Operating Budget Wendy Jarrett, OFM Accounting Edanna Ericson, General Administration Tom Henderson, State Board for Community and Technical Colleges Jim Reed, Higher Education Coordinating Board
After researching our current processes and identifying key findings from the stakeholder interviews, we established a list of issues that were then grouped into objectives. The issues were mentioned in the stakeholder interviews and the JLARC report; they do not necessarily represent a consensus between OFM, the Legislature and all state agencies. (See Capital Process Review – Objectives.) Each objective ties to the key findings, JLARC recommendations, and options to address the issues. (See Capital Process Review – Objectives and Proposals to Address Objectives Identified.)
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A detailed plan with estimated timelines has been created for each objective. (See all attached work plans.) Also included in this report is a timeline chart. (See Capital Review Process Timeline Chart.) OFM will work with JLARC, the Legislature, the Legislative Evaluation and Accountability Program (LEAP), and other state agencies to implement this plan to improve the capital budget process.
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CAPITAL PROCESS REVIEW - OBJECTIVES
A. B. C. Establish cost guidelines and benchmarks to assist analysts in budget development. Clarify our understanding of funding constraints and conditions to make it easier to correctly align project types with funding sources. By taking a more comprehensive approach to the budget development and implementation cycle, eliminate low-value tasks and help all participants focus on the most important issues. Improve tools for the budget processes to reduce the burden of administrative tasks and increase time available for analysis and decision-making. Ensure better connections between the operating and capital budgets Improve the allotment and monitoring processes to reduce time spent on non-value added tasks. Improve the guidance available for everyone involved in the capital budget process. Make better use of information about facility needs and conditions for budget development and monitoring. Streamline the budget bill process.
D. E. F. G. H. I.
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
NOTE: Issues shown in boldface are JLARC recommendations. A. Establish cost guidelines and benchmarks to assist analysts in budget development.
Issues identified Proposals to address this objective
• Project unit costs vary substantially, and the lack of benchmarks makes comparisons and evaluation difficult during budget development. • Establishing benchmarks supports the ability to establish and track performance measures. • Developing statewide performance measures for all capital projects. (JLARC) • Identifying and institutionalizing procedures and best practices. (JLARC)
1. Develop cost guidelines: a) Hire consultant to assist in the development of cost guidelines and benchmarks. Approximately $30,000. OR b) OFM leads the effort to develop cost guidelines and benchmarks. 2. Establish construction related performance measures for capital projects.
B.
Clarify our understanding of funding constraints and conditions to make it easier to correctly align project types with funding sources.
Issues identified Proposals to address this objective
• There is no consistency between the evaluation of the proposal and the role of alternative financing in the capital budget. • It should be made easier to align project types with funding conditions and constraints.
1. Develop a capital financing reference guide that defines the conditions and constraints related to different types of bonds and other methods of financing, including grant programs. 2. Improve the process for alternative financing to consider relative project priorities before financing options.
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
C. By taking a more comprehensive approach to the budget development and implementation cycle, eliminate low-value tasks and help all participants focus on the most important issues.
Issues identified Proposals to address this objective
• Some agencies’ ten-year plans seem to have little planning value beyond the first two years. • Project phasing increases the time it takes to complete projects. (Agency comment) • Budget proposals should produce more scalable budget options, rather than offering only a “yes/no” option. (Legislative comment) • Information helpful for decision-making is not always available. • The major project threshold is too low. (Agency comment) • The use of different project number schemes at different phases of the lifecycle makes it difficult to monitor projects through time. • Agencies are required to submit too many reports and data at the same time without consideration of workload and the normal business cycle. • Although the reappropriation process consumes significant resources, the assumed purpose and benefit is not clear. • There currently is no clear policy on how to report capital-related FTEs. • Need a better understanding on which staff should be considered part of the capital budget.
1. Develop a work plan to improve the budget development process: a) Identify information needed to make budget decisions. This would include data needed for minor works, major projects, projects between $1 and $5 million, and grants. b) Evaluate each component of the process and consider other models for meeting objectives. (For example, consider the benefits of the transportation budget model.) c) Design a budget process and a set of budget instructions that can ensure decision-makers receive the information they need, while streamlining the development of that information and eliminating non-value added tasks. d) Confirm the objectives of the reappropriation process and streamline the process itself: a. Improve tools to calculate adjustment amounts. b. Consider reappropriating only certain types of projects. c. Consider other methods of reappropriation. e) Revisit the threshold set for major projects and minor works. 2. Contract for Predesign Review Assistance.
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• The grant-funded projects have a significant budget impact, yet appear to receive a different level of review than other projects. • Evaluating projects earlier in the planning phases. (JLARC) • Aligning resources to program workload. (JLARC) • Identifying and institutionalizing procedures and best practices.
3. Clarify the desired approach for budgeting capital FTEs and establish a better process for monitoring. 4. Improve the process for assigning project numbers to enable easy and accurate tracking of projects. 5. Establish easier methods for agencies to submit data to reduce re-keying data (e.g. If you are agency X, submit form A. If you are agency Y, submit form B.)
D.
Improve tools for the budget processes to reduce the burden of administrative tasks and increase time available for analysis and decision-making.
Issues identified Proposals to address this objective
• The capital systems and tools do not assist participants with their tasks. Systems should be upgraded and designed to provide better information in a timely manner. • Data is not easily accessible to all participants (i.e., C100 is valuable data only accessible to agencies.) • Questions in C2 are unclear. • Agencies currently create elaborate Excel spreadsheets to build the budget. Then they spend one week to two months keying the data into Capital Budget System. • Agencies do not have version compare reports. • Creating easily accessible, reliable information systems. (JLARC)
Two basic approaches to improving system tools will be explored: 1. Make minor adjustments to existing systems within current funding to streamline the process as much as possible. (e.g., add version comparison reports, better align system forms with desired information and budget instructions.) 2. Make major system modifications and/or new systems that will support the most critical budget development needs. (More research is needed to determine the scope of changes needed.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
E. Ensure better connections between the operating and capital budgets
Issues identified Proposals to address this objective
Operating and capital budgets are not necessarily well-connected, which creates the risk that the budgets work at cross purposes or that related costs are not included.
1. Clearly define which type of items should be in the operating budget and which should be in the capital budget, and provide this guidance in both the capital and operating budget instructions. a. As part of the review of grants and alternative funding sources, evaluate whether grants should move to the operating budget. 2. Modify the budget instructions and systems to ensure that ongoing operating cost information is collected about each capital project. Identify a process that will help ensure operating costs are being included in the appropriate operating budget. 3. Modify the OFM internal budget process to improve communication opportunities between operating and capital analysts. 4. Use the Priorities of Government framework as an aid to evaluating capital project proposals. Modify the budget instructions to ask agencies to link projects to statewide results. Modify budget systems, if necessary, to facilitate the organization and review of project information by result area and strategy. 5. Establish programmatic performance measures that tie directly with the operating budget. This could be part of idea 4.
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
F. Improve the allotment and monitoring processes to reduce time spent on non-value added tasks.
Issues identified Proposals to address this objective
• The OFM allotment process needs to be better defined and streamlined. • The expectations and approach for OFM project monitoring are not well-defined. • There is no ability to affect projects after allotments have been approved. • More time should be spent on evaluating major project proposals and monitoring their implementation. • Accountability roles and expectations for project management and completion are not well-defined. • Minor works lists are difficult to monitor at a statewide level. • OFM budget development and execution processes could be streamlined to free up more time for project analysis and decision support tasks. • Aligning resources to program workload. (JLARC)
1. Evaluate the current process and separate the activities and information needs related to: - Evaluating and approving a proposed allotment plan - Evaluating and approving other aspects of project proposals. 2. Look for opportunities to streamline the process and consider whether the two types of review could be separated. 3. Evaluate whether the current recast process, where agencies are asked to provide detailed information related to the enacted budget, is truly necessary. If so, identify ways to streamline the process. 4. Develop better tools to assist in monitoring projects and doing allotments. 5. Clarify roles and information needs for each project type (i.e., minor works, major projects, grants, etc.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
G. Improve the guidance available for everyone involved in the capital budget process.
Issues identified Proposals to address this objective
• The budget decision-making process is not understood or followed by all participants, which causes confusion, rework and inefficiencies. • Staff turnover in the capital area contributes to lack of continuity and historical perspective. • While current levels of communication among those working on capital issues are good, they could still be improved.
1. Document OFM budget processes and provide better training and guides to analysts. 2. Identify ways to improve communication during all aspects of the process, budget and execution. 3. Continue to improve capital budget-related instructions to agencies. 4. Identify other communication methods (e.g. develop training sessions, agency visits, FAQs, re-establish Capital Policy & Communication Committee type meetings.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
H. Make better use of information about facility needs and conditions for budget development and monitoring.
Issues identified Proposals to address this objective
• Facility needs and conditions are not consistently taken into account in making budget proposals and decisions. • There currently is no accurate statewide ability to monitor and maintain information about capital assets. (Facility Information System/Capital Asset Management System) • This data would provide valuable information. • JLARC study 05-10: OFM should contribute to the policy deliberation about sustaining or expanding the Comparable Framework into the future by making recommendations to the Legislature concerning information assembled from capital agencies about facility preservation and asset stewardship.
1. Improve the accuracy, timeliness and availability of facility information. a) Purchase an asset management system to be used statewide. - OR b) Modify the current process to improve the accuracy and timeliness of the data. 2. Make this data available and part of the budget evaluation process. 3. Review statutes and revise as necessary (i.e., For Maintenance Summary, RCW 43.88.110 is similar to RCW 43.82.150.)
I.
Streamline the budget bill process.
Issues identified Proposals to address this objective
• Developing and maintaining the budget bill is a manual process, which creates opportunities for errors.
1. Evaluate processes and technology used to create the budget bill and identify opportunities to streamline. This may require help from the Code Reviser’s Office.
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IMPROVE BUDGET DEVELOPMENT WORK PLAN – (OBJECTIVES C & E)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff and stakeholders for review and comment Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Prepare draft project charter Identify and invite members to serve on team Finalize project charter Finalize work plan Ongoing project management and communication May 2006 Assumes key stakeholders are available. Assumes access to key information. Assumes reappropriations, 10-year plans, pre-design review, and other components in the budget process will be evaluated. Note: While evaluating whether the Priorities of Government framework can be used with capital, consider evaluating types of facilities to support goals. Time Frame Start November 2005 Assumptions/Notes Assumes that this project will assist in budget development for agencies, OFM and the Legislature. Assumes this addresses JLARC recommendations in report 05-7. Note: JLARC recommendations in Report 02-10 will also be addressed.
2. Conduct Research • • Document current budget development and implementation cycle document (complete) Research information gaps and how to close them • • • • Document data currently available for budget decisions Identify types of data in a capital budget (i.e., major projects, minor works, and grants) Identify information needed to make budget decisions Determine gaps between data currently available and data needed • • Identify cause for gaps (instructions unclear, systems don’t allow, etc.) Can agency internal forms be used to reduce re-keying data? What are the agency internal systems?
Research how agencies prepare data • •
•
Strengthen criteria for items that belong in the capital budget • Identify what FTEs should be included in the capital budget • • • Clarify approach for budgeting capital FTEs Research options to track capital FTEs
Define capital budget versus operating budget
•
Identify process improvements
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Task • • • Identify processes that consume large amounts of resources Review whether processes are value added or opportunities for improvement Review the process for assigning project numbers • • • • • • Discuss with the Legislature and LEAP Identify system impacts if numbers assigned differently
Time Frame
Assumptions/Notes
Research other budget models for ideas for process improvement (i.e., transportation budget) Revisit the threshold for major projects Evaluate whether the Priorities of Government framework (including programmatic performance measures) could be used for the capital budget Identify options for ensuring operating costs are included in the appropriate budget
Strengthen strategic nature of the capital budget
• • • •
Develop options for improvement Develop recommendations Share options and recommendations with stakeholders June 2006
3. Select Recommendations to Implement • • Review recommendations with OFM Director Make decision based on input from Director
4. Implement Recommendations • • • • • • Develop implementation plan Identify resources to implement Develop requirements if system changes Develop documentation for process Develop key communication points during budget development Identify methods to communicate throughout the process
July 2006
IT resources will be necessary for “Improving Tools.” Assumes that some tools can be used for 2007-09. Major changes will not be available until supplemental budgets and development of the 2009-11 budget.
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PERFORMANCE MEASURES AND GUIDELINES WORK PLAN – (OBJECTIVE A)
Task 1. Confirm Project Scope and Approach • • • • • • • • • • • • • • • • • • • • • • • • • • Prepare draft project work plan Gain approval for project from OFM Director Identify key stakeholders to assist with the project Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Research consulting costs Confirm how performance measures and guidelines will be used Identify what data types to develop performance and guidelines for, (i.e. cost per square foot) Develop categories if needed, (i.e. higher ed may be different than natural resource agencies) Review draft project materials with the key stakeholders Determine whether to hire a consultant or to perform work within OFM Ongoing communication Analyze current project costs in Washington State government to identify averages and outliers Research how the private sector, other jurisdictions, and other states pay for construction. Research project costs in the private sector, if available Research standards used by other entities and jurisdictions, such as local governments Research what performance measures are used in Dept. of Transportation and other agencies for capital projects Prepare draft guidelines/benchmarks with options Draft project performance measures Share research findings with stakeholders Finalize guideline/benchmark options Finalize performance measures Seek approval from OFM Director Develop a plan to maintain and update guidelines Review document with key stakeholders Include in Budget Instructions February 2006 July 2006 Budget instructions are drafted in February. Some changes may occur after the February date. December 2005 Assumes key stakeholders are available. Assumes access to key information. Time Frame To be complete in December 2005 Assumptions/Notes Assumes that this project will assist budget development for agencies, OFM and Legislature. Assumes performance measures will be used for budget development and monitoring. Also, the Capital Review Committee, established in House Bill 1830, will be involved.
2. Conduct Research
3. Implement Recommendations
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FACILITY CONDITION INFORMATION WORK PLAN – (OBJECTIVE H)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication November 2006 Time Frame Start in June 2006 Assumptions/Notes Assumes that this project will provide information to agencies, OFM, and the Legislature for developing budgets. May need a temporary solution for June 2006. This is identified in the Roadmap Enterprise Business Modeling project – 2010. Assumes key stakeholders are available. Assumes access to key information. Assumes budget process needs are identified from “Improve Capital Budget Development Processes” project.
2. Conduct Research • • • • • Evaluate budget development and implementation cycle document (created) Review the current process of collecting facility data Document data currently available Identify statutes related to submitting facility data to OFM Evaluate current studies: • • • • • • • • • • • • JLARC Study 05-10, Comparable Framework Brewer Consulting Report Sierra Systems Report
Identify information needed for budget development Identify information needed for monitoring Determine gaps between data currently available and data needed Identify what systems agencies use to monitor facility conditions Identify how agencies use facility information in developing budgets Identify opportunities for improvement Develop options for improvement Develop recommendations Share options and recommendations with communication group
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3. Select Approach • • Review recommendations with OFM Director Make decision based on input from Director
December 2006
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
January 2007 This may be later
If a statewide full asset management solution is recommended, current resources may not be available until 2010. This is identified in the Roadmap Enterprise Business Modeling project – 2010. Assumes resources are provided to accomplish this task.
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FUNDING SOURCES WORK PLAN – (OBJECTIVE B)
Task 1. Confirm Project Scope and Approach • • • • • Prepare draft project work plan Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Coordinate with consultant evaluating the public infrastructure grant process. Ongoing communication February 2006 Assumes access to key information. Time Frame December 2005 Assumptions/Notes Assumes that this project will provide information for budget development. Assumes that the public infrastructure grant process is complete.
2. Research and Documentation • • • • • • • Develop a list of capital funds that are not grants Determine what data information is necessary (i.e. taxable, definition of fund, etc.) Identify fund definitions in statute Prepare draft document without grants Collect input from stakeholders (i.e. House, Senate) Review grant document to be complete in December Incorporate pertinent information into funding document
3. Implement • • Finalize document Share and communicate document to stakeholders
March 2006
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IMPROVE ALLOTMENT AND MONITORING WORK PLAN – (OBJECTIVE F)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication July 2006 Assumes key stakeholders are available. Assumes access to key information. Assumes some information needs are identified during “Improve Capital Budget Development Process” project. Note: Include JLARC recommendations from 0210: Capital Budget Staffing and Administration Cost Study. Time Frame Start in January 2006 Assumptions/Notes Assumes that this project will assist agencies and OFM in developing allotments and monitoring capital projects.
2. Conduct Research • • Document budget development and implementation cycle document (completed) Review the allotment process • • Document data currently available for allotment process Identify information needed to approve allotments and identify what subset of current practices is fulfilling other stated monitoring needs. • • Is there a need to recast the budget? Identify information needs for different project types (i.e. minor works, major projects, grants, etc.) Define what it means to “approve” an allotment
• •
Determine gaps between data currently available and data needed • Identify any current tasks performed by OFM that are not essential to OFM’s role in budget implementation or do not add significant value compared to the cost of the effort or level of risk
• • •
Identify opportunities for improvement Document data currently available for the monitoring process • • What reports do agencies provide? Can we get actuals?
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Review the monitoring process
Task • • Determine what OFM should monitor Identify information needed to assist in monitoring projects • Identify information needs for different project types (i.e. minor works, major projects, grants, etc.)
Time Frame
Assumptions/Notes
• • • • •
Determine gaps between data currently available and data needed Review whether processes are value added or opportunities for improvement
Develop options for improvement Develop recommendations Share options and recommendations with communication group July 2006
3. Select Approach • • Review recommendations with OFM Director Make decision based on input from Director
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
August 2006
Assumes The Allotment System (TALS) will eliminate some of the issues regarding allotments.
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STREAMLINE BUDGET BILL WORK PLAN – (OBJECTIVE I)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication September 2006 Assumes key stakeholders are available. Assumes access to key information. Time Frame May 2006 Assumptions/Notes Assumes that this project will streamline the process to produce the budget bill. Assumes the Code Reviser’s Office and OFM Legal Counsel are involved.
2. Conduct Research • • • • • • Review the current process of developing the budget bills (operating, capital, and transportation) Identify systems used in OFM, Code Reviser’s office, and the Legislature Identify opportunities for improvements Develop options for improvement Develop recommendations Share options and recommendations with communication group
3. Select Approach • •
September 2006 Review recommendations with Code Reviser and OFM Legal Counsel Make decision based on input October 2006 If system changes are needed, there currently are no resources.
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
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doc_596716213.pdf
Budgeting refers to the setting of the expenditure with respect to the organization’s core function which is responsible for the overall functionality of the firm.
Capital Budget Process
Report to the Joint Legislative Audit and Review Committee
OFFICE OF FINANCIAL MANAGEMENT DECEMBER 2005
TABLE OF CONTENTS
Executive Summary .....................................................................................................1 Capital Process Review – Objectives ..........................................................................3 Proposals to Address Objectives Identified .................................................................4 Improve Budget Development Work Plan – (Objectives C & E) ..............................11 Performance Measures and Guidelines Work Plan – (Objective A) ..........................13 Facility Condition Information Work Plan – (Objective H).......................................14 Funding Sources Work Plan – (Objective B) .............................................................16 Improve Allotment and Monitoring Work Plan – (Objective F)................................17 Streamline Budget Bill Work Plan – (Objective I).....................................................19 Capital Review Process Timeline – (Chart) ...............................................................20
EXECUTIVE SUMMARY
In February 2005, the Joint Legislative Audit and Review Committee (JLARC) issued a performance audit report on the state’s capital budget process. The report recommended that the Office of Financial Management (OFM) develop a plan to address shortcomings in the capital budget process. Specifically, we were asked to: • • • • • Align resources to program workload; Identify and institutionalize procedures and best practices; Create easily accessible, reliable information systems; Develop statewide performance measures for all capital projects; and Evaluate projects earlier in the planning phase.
The JLARC report focused on “major projects.” Knowing that OFM, the Legislature, and state agencies need better ways to collect and analyze data, OFM decided to evaluate the entire process, and not confine our review to “major projects.” OFM submitted an interim report to JLARC in April 2005. This report included a work plan to analyze current processes, interview stakeholders, identify process improvements, and develop timelines to implement the changes. Our focus was to identify the strengths and weaknesses of the current capital budget processes, delineate needs and expectations, and make recommendations for change that satisfy legislative and executive decisionsupport requirements. Emphasis was placed on improving management systems, streamlining business processes and policies, and strengthening service delivery and accountability throughout state government. The members of the project team are Steve Masse, Craig Olson, and Debbie Hoxit. Before we began our research, we established an advisory group consisting of the following members: • • • • • • • • Brian Sims, Senate Ways and Means Committee Susan Howson, House Capital Budget Committee Mike Roberts and Tom Saelid, OFM Capital Budget Lynne McGuire, OFM Operating Budget Wendy Jarrett, OFM Accounting Edanna Ericson, General Administration Tom Henderson, State Board for Community and Technical Colleges Jim Reed, Higher Education Coordinating Board
After researching our current processes and identifying key findings from the stakeholder interviews, we established a list of issues that were then grouped into objectives. The issues were mentioned in the stakeholder interviews and the JLARC report; they do not necessarily represent a consensus between OFM, the Legislature and all state agencies. (See Capital Process Review – Objectives.) Each objective ties to the key findings, JLARC recommendations, and options to address the issues. (See Capital Process Review – Objectives and Proposals to Address Objectives Identified.)
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A detailed plan with estimated timelines has been created for each objective. (See all attached work plans.) Also included in this report is a timeline chart. (See Capital Review Process Timeline Chart.) OFM will work with JLARC, the Legislature, the Legislative Evaluation and Accountability Program (LEAP), and other state agencies to implement this plan to improve the capital budget process.
2
CAPITAL PROCESS REVIEW - OBJECTIVES
A. B. C. Establish cost guidelines and benchmarks to assist analysts in budget development. Clarify our understanding of funding constraints and conditions to make it easier to correctly align project types with funding sources. By taking a more comprehensive approach to the budget development and implementation cycle, eliminate low-value tasks and help all participants focus on the most important issues. Improve tools for the budget processes to reduce the burden of administrative tasks and increase time available for analysis and decision-making. Ensure better connections between the operating and capital budgets Improve the allotment and monitoring processes to reduce time spent on non-value added tasks. Improve the guidance available for everyone involved in the capital budget process. Make better use of information about facility needs and conditions for budget development and monitoring. Streamline the budget bill process.
D. E. F. G. H. I.
3
PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
NOTE: Issues shown in boldface are JLARC recommendations. A. Establish cost guidelines and benchmarks to assist analysts in budget development.
Issues identified Proposals to address this objective
• Project unit costs vary substantially, and the lack of benchmarks makes comparisons and evaluation difficult during budget development. • Establishing benchmarks supports the ability to establish and track performance measures. • Developing statewide performance measures for all capital projects. (JLARC) • Identifying and institutionalizing procedures and best practices. (JLARC)
1. Develop cost guidelines: a) Hire consultant to assist in the development of cost guidelines and benchmarks. Approximately $30,000. OR b) OFM leads the effort to develop cost guidelines and benchmarks. 2. Establish construction related performance measures for capital projects.
B.
Clarify our understanding of funding constraints and conditions to make it easier to correctly align project types with funding sources.
Issues identified Proposals to address this objective
• There is no consistency between the evaluation of the proposal and the role of alternative financing in the capital budget. • It should be made easier to align project types with funding conditions and constraints.
1. Develop a capital financing reference guide that defines the conditions and constraints related to different types of bonds and other methods of financing, including grant programs. 2. Improve the process for alternative financing to consider relative project priorities before financing options.
4
PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
C. By taking a more comprehensive approach to the budget development and implementation cycle, eliminate low-value tasks and help all participants focus on the most important issues.
Issues identified Proposals to address this objective
• Some agencies’ ten-year plans seem to have little planning value beyond the first two years. • Project phasing increases the time it takes to complete projects. (Agency comment) • Budget proposals should produce more scalable budget options, rather than offering only a “yes/no” option. (Legislative comment) • Information helpful for decision-making is not always available. • The major project threshold is too low. (Agency comment) • The use of different project number schemes at different phases of the lifecycle makes it difficult to monitor projects through time. • Agencies are required to submit too many reports and data at the same time without consideration of workload and the normal business cycle. • Although the reappropriation process consumes significant resources, the assumed purpose and benefit is not clear. • There currently is no clear policy on how to report capital-related FTEs. • Need a better understanding on which staff should be considered part of the capital budget.
1. Develop a work plan to improve the budget development process: a) Identify information needed to make budget decisions. This would include data needed for minor works, major projects, projects between $1 and $5 million, and grants. b) Evaluate each component of the process and consider other models for meeting objectives. (For example, consider the benefits of the transportation budget model.) c) Design a budget process and a set of budget instructions that can ensure decision-makers receive the information they need, while streamlining the development of that information and eliminating non-value added tasks. d) Confirm the objectives of the reappropriation process and streamline the process itself: a. Improve tools to calculate adjustment amounts. b. Consider reappropriating only certain types of projects. c. Consider other methods of reappropriation. e) Revisit the threshold set for major projects and minor works. 2. Contract for Predesign Review Assistance.
5
• The grant-funded projects have a significant budget impact, yet appear to receive a different level of review than other projects. • Evaluating projects earlier in the planning phases. (JLARC) • Aligning resources to program workload. (JLARC) • Identifying and institutionalizing procedures and best practices.
3. Clarify the desired approach for budgeting capital FTEs and establish a better process for monitoring. 4. Improve the process for assigning project numbers to enable easy and accurate tracking of projects. 5. Establish easier methods for agencies to submit data to reduce re-keying data (e.g. If you are agency X, submit form A. If you are agency Y, submit form B.)
D.
Improve tools for the budget processes to reduce the burden of administrative tasks and increase time available for analysis and decision-making.
Issues identified Proposals to address this objective
• The capital systems and tools do not assist participants with their tasks. Systems should be upgraded and designed to provide better information in a timely manner. • Data is not easily accessible to all participants (i.e., C100 is valuable data only accessible to agencies.) • Questions in C2 are unclear. • Agencies currently create elaborate Excel spreadsheets to build the budget. Then they spend one week to two months keying the data into Capital Budget System. • Agencies do not have version compare reports. • Creating easily accessible, reliable information systems. (JLARC)
Two basic approaches to improving system tools will be explored: 1. Make minor adjustments to existing systems within current funding to streamline the process as much as possible. (e.g., add version comparison reports, better align system forms with desired information and budget instructions.) 2. Make major system modifications and/or new systems that will support the most critical budget development needs. (More research is needed to determine the scope of changes needed.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
E. Ensure better connections between the operating and capital budgets
Issues identified Proposals to address this objective
Operating and capital budgets are not necessarily well-connected, which creates the risk that the budgets work at cross purposes or that related costs are not included.
1. Clearly define which type of items should be in the operating budget and which should be in the capital budget, and provide this guidance in both the capital and operating budget instructions. a. As part of the review of grants and alternative funding sources, evaluate whether grants should move to the operating budget. 2. Modify the budget instructions and systems to ensure that ongoing operating cost information is collected about each capital project. Identify a process that will help ensure operating costs are being included in the appropriate operating budget. 3. Modify the OFM internal budget process to improve communication opportunities between operating and capital analysts. 4. Use the Priorities of Government framework as an aid to evaluating capital project proposals. Modify the budget instructions to ask agencies to link projects to statewide results. Modify budget systems, if necessary, to facilitate the organization and review of project information by result area and strategy. 5. Establish programmatic performance measures that tie directly with the operating budget. This could be part of idea 4.
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
F. Improve the allotment and monitoring processes to reduce time spent on non-value added tasks.
Issues identified Proposals to address this objective
• The OFM allotment process needs to be better defined and streamlined. • The expectations and approach for OFM project monitoring are not well-defined. • There is no ability to affect projects after allotments have been approved. • More time should be spent on evaluating major project proposals and monitoring their implementation. • Accountability roles and expectations for project management and completion are not well-defined. • Minor works lists are difficult to monitor at a statewide level. • OFM budget development and execution processes could be streamlined to free up more time for project analysis and decision support tasks. • Aligning resources to program workload. (JLARC)
1. Evaluate the current process and separate the activities and information needs related to: - Evaluating and approving a proposed allotment plan - Evaluating and approving other aspects of project proposals. 2. Look for opportunities to streamline the process and consider whether the two types of review could be separated. 3. Evaluate whether the current recast process, where agencies are asked to provide detailed information related to the enacted budget, is truly necessary. If so, identify ways to streamline the process. 4. Develop better tools to assist in monitoring projects and doing allotments. 5. Clarify roles and information needs for each project type (i.e., minor works, major projects, grants, etc.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
G. Improve the guidance available for everyone involved in the capital budget process.
Issues identified Proposals to address this objective
• The budget decision-making process is not understood or followed by all participants, which causes confusion, rework and inefficiencies. • Staff turnover in the capital area contributes to lack of continuity and historical perspective. • While current levels of communication among those working on capital issues are good, they could still be improved.
1. Document OFM budget processes and provide better training and guides to analysts. 2. Identify ways to improve communication during all aspects of the process, budget and execution. 3. Continue to improve capital budget-related instructions to agencies. 4. Identify other communication methods (e.g. develop training sessions, agency visits, FAQs, re-establish Capital Policy & Communication Committee type meetings.)
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PROPOSALS TO ADDRESS OBJECTIVES IDENTIFIED BY THE CAPITAL PROCESS REVIEW
H. Make better use of information about facility needs and conditions for budget development and monitoring.
Issues identified Proposals to address this objective
• Facility needs and conditions are not consistently taken into account in making budget proposals and decisions. • There currently is no accurate statewide ability to monitor and maintain information about capital assets. (Facility Information System/Capital Asset Management System) • This data would provide valuable information. • JLARC study 05-10: OFM should contribute to the policy deliberation about sustaining or expanding the Comparable Framework into the future by making recommendations to the Legislature concerning information assembled from capital agencies about facility preservation and asset stewardship.
1. Improve the accuracy, timeliness and availability of facility information. a) Purchase an asset management system to be used statewide. - OR b) Modify the current process to improve the accuracy and timeliness of the data. 2. Make this data available and part of the budget evaluation process. 3. Review statutes and revise as necessary (i.e., For Maintenance Summary, RCW 43.88.110 is similar to RCW 43.82.150.)
I.
Streamline the budget bill process.
Issues identified Proposals to address this objective
• Developing and maintaining the budget bill is a manual process, which creates opportunities for errors.
1. Evaluate processes and technology used to create the budget bill and identify opportunities to streamline. This may require help from the Code Reviser’s Office.
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IMPROVE BUDGET DEVELOPMENT WORK PLAN – (OBJECTIVES C & E)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff and stakeholders for review and comment Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Prepare draft project charter Identify and invite members to serve on team Finalize project charter Finalize work plan Ongoing project management and communication May 2006 Assumes key stakeholders are available. Assumes access to key information. Assumes reappropriations, 10-year plans, pre-design review, and other components in the budget process will be evaluated. Note: While evaluating whether the Priorities of Government framework can be used with capital, consider evaluating types of facilities to support goals. Time Frame Start November 2005 Assumptions/Notes Assumes that this project will assist in budget development for agencies, OFM and the Legislature. Assumes this addresses JLARC recommendations in report 05-7. Note: JLARC recommendations in Report 02-10 will also be addressed.
2. Conduct Research • • Document current budget development and implementation cycle document (complete) Research information gaps and how to close them • • • • Document data currently available for budget decisions Identify types of data in a capital budget (i.e., major projects, minor works, and grants) Identify information needed to make budget decisions Determine gaps between data currently available and data needed • • Identify cause for gaps (instructions unclear, systems don’t allow, etc.) Can agency internal forms be used to reduce re-keying data? What are the agency internal systems?
Research how agencies prepare data • •
•
Strengthen criteria for items that belong in the capital budget • Identify what FTEs should be included in the capital budget • • • Clarify approach for budgeting capital FTEs Research options to track capital FTEs
Define capital budget versus operating budget
•
Identify process improvements
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Task • • • Identify processes that consume large amounts of resources Review whether processes are value added or opportunities for improvement Review the process for assigning project numbers • • • • • • Discuss with the Legislature and LEAP Identify system impacts if numbers assigned differently
Time Frame
Assumptions/Notes
Research other budget models for ideas for process improvement (i.e., transportation budget) Revisit the threshold for major projects Evaluate whether the Priorities of Government framework (including programmatic performance measures) could be used for the capital budget Identify options for ensuring operating costs are included in the appropriate budget
Strengthen strategic nature of the capital budget
• • • •
Develop options for improvement Develop recommendations Share options and recommendations with stakeholders June 2006
3. Select Recommendations to Implement • • Review recommendations with OFM Director Make decision based on input from Director
4. Implement Recommendations • • • • • • Develop implementation plan Identify resources to implement Develop requirements if system changes Develop documentation for process Develop key communication points during budget development Identify methods to communicate throughout the process
July 2006
IT resources will be necessary for “Improving Tools.” Assumes that some tools can be used for 2007-09. Major changes will not be available until supplemental budgets and development of the 2009-11 budget.
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PERFORMANCE MEASURES AND GUIDELINES WORK PLAN – (OBJECTIVE A)
Task 1. Confirm Project Scope and Approach • • • • • • • • • • • • • • • • • • • • • • • • • • Prepare draft project work plan Gain approval for project from OFM Director Identify key stakeholders to assist with the project Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Research consulting costs Confirm how performance measures and guidelines will be used Identify what data types to develop performance and guidelines for, (i.e. cost per square foot) Develop categories if needed, (i.e. higher ed may be different than natural resource agencies) Review draft project materials with the key stakeholders Determine whether to hire a consultant or to perform work within OFM Ongoing communication Analyze current project costs in Washington State government to identify averages and outliers Research how the private sector, other jurisdictions, and other states pay for construction. Research project costs in the private sector, if available Research standards used by other entities and jurisdictions, such as local governments Research what performance measures are used in Dept. of Transportation and other agencies for capital projects Prepare draft guidelines/benchmarks with options Draft project performance measures Share research findings with stakeholders Finalize guideline/benchmark options Finalize performance measures Seek approval from OFM Director Develop a plan to maintain and update guidelines Review document with key stakeholders Include in Budget Instructions February 2006 July 2006 Budget instructions are drafted in February. Some changes may occur after the February date. December 2005 Assumes key stakeholders are available. Assumes access to key information. Time Frame To be complete in December 2005 Assumptions/Notes Assumes that this project will assist budget development for agencies, OFM and Legislature. Assumes performance measures will be used for budget development and monitoring. Also, the Capital Review Committee, established in House Bill 1830, will be involved.
2. Conduct Research
3. Implement Recommendations
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FACILITY CONDITION INFORMATION WORK PLAN – (OBJECTIVE H)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication November 2006 Time Frame Start in June 2006 Assumptions/Notes Assumes that this project will provide information to agencies, OFM, and the Legislature for developing budgets. May need a temporary solution for June 2006. This is identified in the Roadmap Enterprise Business Modeling project – 2010. Assumes key stakeholders are available. Assumes access to key information. Assumes budget process needs are identified from “Improve Capital Budget Development Processes” project.
2. Conduct Research • • • • • Evaluate budget development and implementation cycle document (created) Review the current process of collecting facility data Document data currently available Identify statutes related to submitting facility data to OFM Evaluate current studies: • • • • • • • • • • • • JLARC Study 05-10, Comparable Framework Brewer Consulting Report Sierra Systems Report
Identify information needed for budget development Identify information needed for monitoring Determine gaps between data currently available and data needed Identify what systems agencies use to monitor facility conditions Identify how agencies use facility information in developing budgets Identify opportunities for improvement Develop options for improvement Develop recommendations Share options and recommendations with communication group
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3. Select Approach • • Review recommendations with OFM Director Make decision based on input from Director
December 2006
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
January 2007 This may be later
If a statewide full asset management solution is recommended, current resources may not be available until 2010. This is identified in the Roadmap Enterprise Business Modeling project – 2010. Assumes resources are provided to accomplish this task.
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FUNDING SOURCES WORK PLAN – (OBJECTIVE B)
Task 1. Confirm Project Scope and Approach • • • • • Prepare draft project work plan Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Coordinate with consultant evaluating the public infrastructure grant process. Ongoing communication February 2006 Assumes access to key information. Time Frame December 2005 Assumptions/Notes Assumes that this project will provide information for budget development. Assumes that the public infrastructure grant process is complete.
2. Research and Documentation • • • • • • • Develop a list of capital funds that are not grants Determine what data information is necessary (i.e. taxable, definition of fund, etc.) Identify fund definitions in statute Prepare draft document without grants Collect input from stakeholders (i.e. House, Senate) Review grant document to be complete in December Incorporate pertinent information into funding document
3. Implement • • Finalize document Share and communicate document to stakeholders
March 2006
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IMPROVE ALLOTMENT AND MONITORING WORK PLAN – (OBJECTIVE F)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication July 2006 Assumes key stakeholders are available. Assumes access to key information. Assumes some information needs are identified during “Improve Capital Budget Development Process” project. Note: Include JLARC recommendations from 0210: Capital Budget Staffing and Administration Cost Study. Time Frame Start in January 2006 Assumptions/Notes Assumes that this project will assist agencies and OFM in developing allotments and monitoring capital projects.
2. Conduct Research • • Document budget development and implementation cycle document (completed) Review the allotment process • • Document data currently available for allotment process Identify information needed to approve allotments and identify what subset of current practices is fulfilling other stated monitoring needs. • • Is there a need to recast the budget? Identify information needs for different project types (i.e. minor works, major projects, grants, etc.) Define what it means to “approve” an allotment
• •
Determine gaps between data currently available and data needed • Identify any current tasks performed by OFM that are not essential to OFM’s role in budget implementation or do not add significant value compared to the cost of the effort or level of risk
• • •
Identify opportunities for improvement Document data currently available for the monitoring process • • What reports do agencies provide? Can we get actuals?
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Review the monitoring process
Task • • Determine what OFM should monitor Identify information needed to assist in monitoring projects • Identify information needs for different project types (i.e. minor works, major projects, grants, etc.)
Time Frame
Assumptions/Notes
• • • • •
Determine gaps between data currently available and data needed Review whether processes are value added or opportunities for improvement
Develop options for improvement Develop recommendations Share options and recommendations with communication group July 2006
3. Select Approach • • Review recommendations with OFM Director Make decision based on input from Director
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
August 2006
Assumes The Allotment System (TALS) will eliminate some of the issues regarding allotments.
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STREAMLINE BUDGET BILL WORK PLAN – (OBJECTIVE I)
Task 1. Confirm Project Scope and Approach • • • • • • • • • Prepare draft project work plan Share with key agency staff Develop list of stakeholders for communication purposes Identify resources needed for project – ongoing Develop project charter Identify and invite members to serve on team Finalize work plan Finalize project charter Ongoing project management and communication September 2006 Assumes key stakeholders are available. Assumes access to key information. Time Frame May 2006 Assumptions/Notes Assumes that this project will streamline the process to produce the budget bill. Assumes the Code Reviser’s Office and OFM Legal Counsel are involved.
2. Conduct Research • • • • • • Review the current process of developing the budget bills (operating, capital, and transportation) Identify systems used in OFM, Code Reviser’s office, and the Legislature Identify opportunities for improvements Develop options for improvement Develop recommendations Share options and recommendations with communication group
3. Select Approach • •
September 2006 Review recommendations with Code Reviser and OFM Legal Counsel Make decision based on input October 2006 If system changes are needed, there currently are no resources.
4. Implement Recommendations • • • Develop implementation plan Identify resources to implement Develop documentation for process
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