1. Performance Audit of Capital Budget Processes Proposed Final Report February 8, 2005 Joint Legislative Audit and Review Committee Karen Barrett & Isabel Muñoz-Colón

2. 2 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

3. 3 Assess Strength of State’s Capital Budget Processes Study Conclusions in Brief: Agency Planning Agency Execution OFM’s OversightConcerns OFM is not well positioned for front- end project review. Improvement depends on greater clarity about the Capital Division’s role, priorities and resources.

4. 4 Oversight Activities at OFM Assessment: cost continuum greatest opportunity to influencemajor projects Assessment: OFM spends time further on the cost continuum with agencies at points where the greatest opportunity to influence major projects has passed. Why? workload compared toresources Why? It is a result of OFM’s workload compared to the Capital Division’s resources (2-3 analysts). The biggest driving factors are: Allotments (agency spending plans) Information Systems.

5. 5 Workload vs. Resources: Allotments OFM’s activities are heavily weighted toward managing construction allotments; also challenged to execute requisite work efficiently. Contributing Factors: Lack of benchmarks, procedures, and historical performance information; Lack of benchmarks, procedures, and historical performance information; Review time is increasing; and Review time is increasing; and Reliance on allotments to learn about major projects. Reliance on allotments to learn about major projects.

6. See Appendix 8, pg. 71 6 Workload vs. Resources: Information Systems Weak management information systems make project analysis more time consuming and do not support investment oversight well. Contributing Factors: Data does not readily support evaluation of agency proposed budgets and performance. Data does not readily support evaluation of agency proposed budgets and performance. Key benchmark data, costs, and space standards are not kept current. Key benchmark data, costs, and space standards are not kept current. OFM lacks internal procedures to guide new analysts through advancing projects. OFM lacks internal procedures to guide new analysts through advancing projects.

7. See Figure 6 & 7 on pgs. 24-25 7 JLARC Tools to Manage Workload Portfolio of Major Projects (200+) Gives analysts a way to manage projects through a multi-year capital process. Project 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 performance and identify problem areas on a statewide basis.

8. 8 JLARC Recommendation: OFM should develop a plan in consultation with fiscal committees and agency capital officers to address weaknesses in oversight 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.

9. 9 Agency Response: The Office of Financial Management Concurs Next Steps? April 2005 – Progress on improvement plans developed with legislative fiscal committees. January 2006 – Present and discuss finished plan