| Written by Mark Funkhouser,
|
Like many local government auditors, I work directly for the governing board of my jurisdiction. In many ways, the fate of my community rests on the effectiveness of that board - and the effectiveness of the board depends on the information it receives. The board needs regular and consistent access to three broad classes of information.
Integrity
The board should assure that it receives a broad range of financial information. The board should appoint an audit committee to regularly meet with both commercial and board-appointed auditors. Through the audit committee, the board should:
Receive regular reports on the status of management controls, the nature of risks facing the organization and the steps management is taking to address those risks.
Receive regular reports on the status of organizational assets and the disposition and use of assets, including cash, buildings, equipment and human resources.
Assure that a code of ethics is adopted and that all staff and board members receive regular training in ethics and standards of conduct. Avenues must be available for information to get to the board about the abuse or misuse of organizational resources and about management over-ride of controls.
Capacity
The board has a responsibility to continually develop and shape the capacity of the organization. The capacity of the organization is the result of investment in physical assets and maintenance, investment in human resources, the development of information and technology, and the development of systems, policies and procedures.
Citizens who become board members often feel that they must battle the staff to gain control over the organization. But battling the staff is counter-productive because the staff is the instrument that the board must use to achieve the objectives of the organization. The board must build not reduce the capacity of the organization. But, the more powerful the organization, the better information, systems, and controls the board must have to assure that the force of the organization is used appropriately.
Part of organizational capacity is the strength of the board itself. The board should ensure that there is a significant investment in their own training as board members. This training will show
them how to focus their efforts in ways that they choose, rather than reacting only to events as they unfold or to the initiatives of staff. In this way they will maximize their impact on the organization towards the ends they had in mind when they sought membership on the board
Results
The board needs to assure the establishment of a system of performance measurement. Good performance measures allow the board to hold staff accountable and to focus the organization on important outcomes. Performance measures also fill a vital role in providing a common language to discuss organizational processes and results with important stakeholders in the community.
Any performance measurement system should include at least the following types of measures:
- Inputs. These are measures of resources used or costs. Usually the numbers reported are dollars or numbers of staff.
- Outputs. These are measures of the amount of work completed. The actual numbers reported are usually counts of something. Examples might be "lane miles paved" or "classes held."
- Outcomes. These are measures of the result of the work conducted. Usually outcomes are broken down into intermediate and end outcomes. For example an intermediate outcome of a parent involvement class might be that the children of those parents have better school attendance. An end outcome might be that they have better grades.
- Efficiency. Efficiency measures are ratios of inputs to outputs and inputs to outcomes. In the example above the measures might be cost per parent in the involvement class and cost per student with improved grades.
Credibility
After nearly three decades of growing cynicism and mistrust of government in the United States, credibility is a central issue for most public organizations today. Credibility depends upon the answers to two questions:
- Can the organization be trusted to try to do the right things?
- When it does try, will good results usually be achieved?
If the board has regular access to information of the types described, chances are that most stakeholders in the community it serves will answer these questions in the affirmative.
Mark is City Auditor of Kansas City, Missouri and a regular columnist for the LGAQ.
|
Funkhouser on Auditing