The audit objective was to determine whether the fund achieved the goals identified by DCFM.  The audit focused on the 2001 rate models that set the square foot rates for building operations and maintenance and the hourly rates for minor renovation work, and the assumptions DCFM used to set the target fund balance.

The general audit conclusions are that:

• The Facilities Management Fund did not meet the objectives of enhanced accountability and increased visibility of costs because DCFM did not publish the rates or provide agencies enough information to understand the basis of their charges.

• The framework for the rate models was reasonable but changes in the rate model methodology and calculations would improve DCFM’s ability to recover its costs and provide a more equitable distribution of costs.

• Accounting for revenues and expenditures in the fund was inconsistent with generally accepted accounting principles for internal service funds.

• The financial plan for the fund was fairly stated.  However, the fund did not comply with the county’s fund balance policy, which resulted in large fluctuations in the fund balance.  These fluctuations could indicate that agencies were inappropriately charged for services or potentially disrupt DCFM operations due to an insufficient cash balance.

Finding 2-1. The Facilities Management Fund did not meet the objectives of enhanced accountability and increased visibility of costs as stated in the fund development plan.

Finding 2-2. The conceptual framework for the rate models was reasonable; however, changes in their methodology and calculations would improve DCFM’s ability to recover its costs and distribute the costs more equitably.

Although the rates are intended to generate enough revenue to recover DCFM’s expenditures, for the last four years the actual revenue was less than the budgeted expenditures, and the rate models were not adjusted based on the variances.  Moreover, methodology flaws and calculation errors impacted revenues generated by the square foot and hourly rates and caused inequitable distribution of costs, both among the rate models and among tenant agencies.  Additionally, DCFM did not incorporate a depreciation factor into the rates to build a fund balance for asset replacement.

The audit recommends that DCFM compare each year’s actual and projected revenues and expenditures, analyze the differences to determine their cause, and revise the rate models accordingly; revise the square foot rate model to allocate overhead costs more equitably among tenants; revise the hourly rate models to ensure they reflect actual labor and overhead costs; and develop a plan for asset replacement to use as a basis for incorporating a fund balance factor into the rate models.

The costs were not discretely accounted for and the rates were set at market rather than on a cost-reimbursement basis as required for internal service funds.  Moreover, a portion of parking revenue was earmarked to the Children and Family Set-Aside Fund, which is inconsistent with generally accepted accounting principles and state law.

The audit recommends that DCFM review their accounting practices to determine whether the parking lots would be more appropriately accounted for in an enterprise fund or the current expense, or retained in the Facilities Management Fund.  If retained in the fund, DCFM should discretely account for parking lot costs so the rates can be set on a cost-recovery basis.  We also recommend that the Metropolitan King County Council consider working with staff from the Prosecuting Attorney’s Office and the State Auditor’s Office to ensure that earmarking a portion of the parking revenue to another fund does not violate state law.

Finding 3-2. The Facilities Management Fund’s financial plan is not used as a management tool, resulting in substantial fluctuations in the fund balance.  Moreover, the fund does not comply with the county’s fund balance policy.

The Facilities Management Fund balance fluctuated significantly from year to year because the fund did not comply with county fund balance policies and the financial plans were not used to monitor the fund.  The fluctuations could be an indicator that agencies were inappropriately charged because the rates did not reflect actual costs.  They could also potentially disrupt DCFM operations due to an insufficient cash balance.

The audit recommends that DCFM management use the financial plan as a monitoring tool and develop a plan to establish a fund balance that would be factored into the rate models.